Nashvillians know all about Phil Bredesen and big economic development deals.
The former Nashville mayor turned governor lists on his economic development resume the Dell facility, the Titans’ stadium on the East bank and Nissan’s sparkling new headquarters in Cool Springs.
Last week, that resume added another bullet point with the announcement of the soon-to-be-constructed Volkswagen plant in Chattanooga.
While the projects change, Bredesen has approached each deal the same.
During his tenure as mayor, and then in his time at the governor’s office, Bredesen has used a dealmaker’s mentality, Tennessee’s geographic and business climate advantages plus very competitive and at times controversial incentives to score large economic development coups, officials and observers say.
“Gov. Bredesen is very intelligent, very focused, and he’s a good dealmaker, whether it’s with the Titans or with the Nissan headquarters or with Volkswagen,” said Sen. Lamar Alexander (R-Tenn.) in an interview. “When he focuses on something, there’s a good chance it’s going to happen. And fortunately for Tennessee, he focused on those three big things and they all got done.”
Bredesen is also part of the club, a former chief executive officer himself who can sit across the dinner table with another CEO who knows that Bredesen has filled his shoes before. Bredesen wants that responsibility. His philosophy is that only the mayor or governor can have certain conversations.
Yet despite those accolades and attributes, Bredesen is often criticized for the incentives he’s offered, with many of these critics arguing that Bredesen gives away the store to nab the big deal.
Chattanooga Times-Free Press reports have detailed that Volkswagen’s incentives conservatively reach $400 million over 20 years when state and local incentives are combined. The Bredesen administration’s lack of details regarding the incentives in the deal concern Steve Gill, a conservative radio talk show host.
“The track record that Phil Bredesen has engaged in as mayor, whether it was getting out-negotiated by Michael Dell, by Bud Adams, when they’re not making the incentives known … is there any confidence that this is really a good deal when you look at the actual numbers?” Gill said of Volkswagen’s incentives.
In an interview with The City Paper, Bredesen says he has heard the criticism before, dating back first he says to an expansion of Opryland Hotel while mayor.
Like his intense focus on clinching the deal, Bredesen said he targets his incentives toward “stuff you really want” and doesn’t offer them broadly.
“I don’t know whether it’s fair that a Mercedes Benz cost $90,000, I just know if I want one that’s what I’ve got to pay,” Bredesen said. “So I look at this kind of stuff as look there are people all over the country who are willing to put X dollars on the table for a football team or X dollars on the table for an auto assembly plant or anything else like that.
“I try to do the numbers carefully and try to make sure we’re not doing something stupid, but in the end you’ve got to step up to the plate.”
Part of Bredesen’s strategy in recruiting businesses to Tennessee centers on not simply whether to offer incentives, but how to go about it.
Within Bredesen’s administration, the Department of Economic and Community Development, essentially the state’s sales team, works closely with the Department of Revenue, it’s tax team, to formulate incentives.
Each year during the legislative session, these two departments help craft an administration bill that on paper corrects “technical” portions of Tennessee’s tax code but is also not released until the last days of the session to provide the most marketable incentives to recruit businesses.
This legislative mechanism helped nab Nissan North America’s headquarters from Southern California with a nearly $200 million incentive package.
Bredesen said the Department of Revenue and ECD have created a “very potent vehicle” for recruiting businesses because the tax advisors can give business people a more accurate explanation of Tennessee taxes.
“The involvement of revenue, being able to give people clean answers on the front end to these questions, has been a huge benefit to the state of Tennessee,” Bredesen said. “What a number of these business people have told me is that the usual experience is that ECD promises the world and then revenue comes and takes it away in some way. So I think that combination is there.”
As a result of Tennessee’s Constitution, the state often uses the tax code to offer incentives compared to other states, which simply can write checks to companies using some of their tobacco settlement dollars or energy royalties, said ECD Commissioner Matt Kisber.
Tennessee’s Constitution forbids direct payments to companies as a form of consumer protection because of the railroad industry in post-Civil War days, Kisber said. Back then, railroads would often ask local governments for payments to run the main lines through their towns and then would not deliver on their promise.
“So the offering of tax credits is definitely an important part of the incentive packages,” Kisber said.
The revenue department has two full-time staffers permanently on loan to ECD, Kisber said, including one who reports directly to the commissioner of the Department of Revenue, Reagan Farr.
The main incentives Tennessee offers though, Kisber maintains, is through job training and infrastructure.
These incentives and Tennessee’s central geographic location have contributed to Tennessee having so much recent success in recruiting the auto industry that Bredesen is concerned about the state becoming too dependent on car manufacturers.
He references economically depressed Michigan and other “rust-belt” states that have seen car plants come and then go. The jobs of course go with them.
“You get to dependent on one business, it just flies in the face of good investment philosophy, which is diversify your investments,” Bredesen said.
The governor said another automotive assembly plant would be welcome, but three or four more may start to become a problem.
With Volkswagen’s arrival, Tennessee now has three with Saturn in Spring Hill and Nissan in Smyrna.
Sen. Alexander was governor when Tennessee landed its first automotive plant with Nissan’s arrival in the early 1980s. Saturn came a few years later during Alexander’s second term.
The state’s senior Senator has perhaps a broader vision than Bredesen on the “money magnet” auto industry’s future in Tennessee, saying he thinks Tennessee can be the No. 1 state in the nation.
That doesn’t have to come through auto assembly plants but could occur through a proliferation of suppliers to Tennessee facilities as well as those located in neighboring Southeastern states in which Tennessee competes, Alexander said.
“I believe there’s nothing quite like the auto industry,” Alexander said. “I mean after the assembly plants come, the white collar jobs in the Volkswagen case and in the Nissan headquarters case, then come more suppliers, and they spread out all over the state. It’s Tennessee’s future to have as its goal to be the No. 1 auto state in the country.”