Nashville hits pause button on tax incentives for big businesses

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Dylan Aycock
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On the heels of a budget crisis in which Metro Nashville faced a $41.5 million shortfall, city officials said they are not pursuing new economic incentive deals—at least, not until the city regains its financial strength.

At the same Dec. 11 meeting where Finance Director Kevin Crumbo presented a corrective action plan for the fiscal year 2019-20 budget, Crumbo announced Metro Nashville Mayor John Cooper’s administration is no longer prioritizing incentive deals, which are offered to companies in exchange for new jobs created for residents.

“As we looked down the list, we prioritized economic development behind essential services, public services and the things that we all need every day,” Crumbo said. “I know that my friends in the business community won’t be happy about some of the choices that are embedded here.”

Metro Nashville paid $1.64 million in job grants to companies in FY 2018-19, up from $500,000 the previous fiscal year, according to an annual report of the city’s finances published in December. Companies were also incentivized with reduced taxes through property tax abatements, which climbed from $6.6 million to $8.8 million in the same time period.

Other than incentives that the city has already approved and is legally obligated to pay, Crumbo said he does not expect the city to seek out any new deals during FY 2019-20, which ends June 30. Additionally, the mayor has not yet appointed a director of economic development following the departure of Jamari Brown, who left his position in the mayor’s office Dec. 31.

“Economic development, between now and the end of the [fiscal] year, is going to continue with or without a bolster from the Metro government,” Crumbo said. “[This practice is] not sustainable, and we’ll certainly need to bolster [economic development] in the future, but between now and the end of June, it’s going to have to be in the backseat.”

Future development

In March 2019, Metro Nashville Council approved $21.2 million in combined grants for Amazon’s future operations center and AllianceBernstein’s new headquarters, both of which are under construction in Southwest Nashville—an investment expected to produce more than 6,000 jobs.•While Cooper voted in favor of both deals as an at-large council member, he announced at a Dec. 18 meeting in Belle Meade he does not support what he considers to be costly participation agreements, or deals in which the city agrees to cover the costs of sidewalks, sewers and other development costs.

In February 2019, Cooper, along with two other council members, voted against the $15.2 million participation agreement for road and sewer work at Nashville Yards. The 4 million-square-foot development is the future home of Amazon, a 25-story Grand Hyatt hotel and other properties.

“My campaign was very clear that my priority is neighborhood investments and to not do expensive participation agreements with projects downtown that are doing super well on their own,” Cooper said. “We really need that $15 million for important projects ... I would like to build a sidewalk in your neighborhood. There are schools to be built, and there is a water main break almost every day.”

However, Cooper said that even without help from Metro Nashville in the form of incentives, he is optimistic about the future of development and the jobs it will bring to the city. He cited rising downtown employment numbers published in the Nashville Downtown Partnership’s 2018 downtown census report as promising for job growth; those figures are updated by the nonprofit every three years with new job growth information.

According to the report, in 2018, 72,000 employees worked at 2,471 downtown businesses, organizations and government services, as compared to 57,230 employees for 1,479 employers in 2015. In 2012, 50,335 people worked downtown for 1,486 employers.

“What’s on the table right now is clearly going to propel Nashville into a new era of growth, and we have to be ready for it,” Cooper said. “Nashville will have more growth in the next few years than in the last 10 years.”

Incentive alternatives

While city leaders will ultimately decide the final details for future incentive deals, Nashville entrepreneurs are offering their own ideas on how the city can improve business with companies relocating or opening headquarters in the city.

The Nashville chapter of global business network Entrepreneurs’ Organization—the largest chapter in the U.S., with more than 200 members—presented a report in December that offers 39 ideas to improve Nashville overall as well as an enumeration of what its members consider to be the top issues facing the city.

The report said the city needs to continue recruiting corporate headquarters from other states, such as California and New York, because they bring with them resources that benefit Nashville. The group also suggested city leaders scale back on offering incentives to corporations that already want to be in Nashville and require companies to help pay for various infrastructure improvements.

At a joint press conference with Cooper on Dec. 17, EO Nashville President Bethany Newman said the group plans to work with the mayor to identify areas for improvement when it comes to economic development.

“Thinking big can lead to big results,” Newman said. “We look forward to working with Mayor Cooper in any way we can be helpful, such as discussing the likely effects on entrepreneurs of potential policies, serving on committees or generally sharing what our members tell us about the entrepreneurial ecosystem in Nashville.”

While Cooper said he did not agree with every point outlined in the recommendations, he offered his own ideas for alternatives to large-scale incentives, such as investing in small businesses and developing local talent. He said if the city invests in its own workforce, companies will follow.

State priorities

While Nashville is taking a step back on incentives, state officials said they have no plans to slow down efforts to recruit companies to relocate to Tennessee.

Since 2015, the Tennessee Department of Economic and Community Development has helped more than 35 companies expand to Davidson County, adding more than 22,000 new jobs, according to the department.

“From the state’s perspective, we are going to continue to be very supportive with our incentive-appropriate cash packages, no matter where companies choose to locate,” TNECD Commissioner Bob Rolfe said.

In 2020, the TNECD has established goals to work with companies to create 20,000 jobs and commit $4 billion in capital investments, according to Rolfe. The state awards more than $200 million in tax credits each year.

“We want to keep the foot on the gas to recruit as many good, high-quality companies with high-quality jobs, knowing that at some point, we are going to have another recession,” Rolfe said. “When the next recession does happen, it will provide a softer landing.”


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