incentives

Legislature approves subsidies for rural broadband service

The House has joined the Senate in approving Gov. Bill Haslam’s “Tennessee Broadband Accessibility Act,” sending it to the governor for his signature.

From WBIR’s report:

The bill (SB1215) provides $45 million over three years in grants and tax credits for service providers to help make broadband available to unserved homes and businesses. It also allows Tennessee’s private, nonprofit electric cooperatives to provide retail broadband service.

The third part of the bill makes grant funding available to local libraries to help residents improve their digital literacy skills.

About 34 percent of rural Tennesseans don’t currently have broadband access at recognized minimum standards, according to the state.

Here’s the Haslam administration press release praising passage:

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‘Nashville,’ taxpayer-supported TV show, gets another season

CMT announced on Monday there will be a sixth season of the TV show Nashville, which has now received about $57 million in subsidies from state government and Nashville, reports WSMV.

Last year, the show was canceled by ABC and picked up by CMT. It’s now CMT’s top-rated show, and taxpayer money has helped keep it alive.

“I can tell you unequivocally the show Nashville is not a good investment for taxpayers,” said Mark Cunningham with the Beacon Center of Tennessee.

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TN business incentive tally: $2.5B per year (double national average)

 

A study by the W.E. Upjohn Institute for Employment Research indicates Tennessee state and local governments provide more than $2.5 billion in business incentives annually. That’s nearly 1 percent of the state’s private-sector gross domestic product and makes Tennessee fourth highest in the nation, the study’s author, Timothy Bartik, tells The Tennessean.

In exchange for taxpayer support, businesses are expected to generate jobs and spur economic growth. State and local leaders point to success stories — new companies attracted by economic development packages. But there’s an inherent trade-off for the taxpayer. Grants and tax revenue could instead be directed to improve schools, fix crumbling highways and other key government functions.

The analysis, “A New Panel Database on Business Incentives…in the United States” leads to some key questions: how much is enough? And are the incentives designed to attract well-paying jobs, or dead-end work with little or no benefits? (Note: You can download a copy HERE.)

Bartik, a senior economist at the Michigan-based think tank, found that states with high levels of incentives don’t have significantly better economic performance than their neighbors.

“If incentives have an effect, it’s at best relatively modest,” he said.

Compared with neighboring states, Tennessee leads the way. Incentive levels are 91 percent lower in Virginia, for instance, and 82 percent lower in Georgia. As of 2015, Tennessee’s incentives are 105 percent higher than the national average.

The state stands out for its property tax abatements, the analysis found. In these deals, local governments typically agree to forgo property taxes if a company commits to creating a certain number of jobs and investing a certain about in capital. Because companies make annual payments in lieu of taxes, the arrangements are called “PILOTs.”

Study finds business tax credit costs TN $1.2M per job

An independent firm has found that Tennessee taxpayers forgo $1.2 million each year to subsidize a single job through the state’s largest business tax break program, reports The Tennessean.

Chicago-based consulting firm Anderson Economic Group was retained to do a study of business tax credits because of a provision inserted into legislation enacted in 2015. The newspaper obtained a copy of the report, which says Tennessee loses $142 million per year in revenue because of tax credits.

Businesses that received the Industrial Machinery Tax Credit actually hired fewer people, on average, than their peers in the few years after taking the credit, the consultants found. When taking into account a ripple effect – how much the additional spending affected other parts of the economy – the annual impact came out to an additional 55 jobs per year.

That particular credit cost the state an average of $66.7 million per year from 2011 through 2014, or $1.2 million per job.

“The results show that, on average, the industrial machinery credit does not have a significant effect on employment,” the authors wrote in the report “The Economic Impact of Business Tax Credits in Tennessee.”

One explanation for the meager job growth could be that companies are automating job functions and buying expensive equipment that doesn’t require many workers to operate.

“At first, that sounds like a really bad thing,” said Fox from the University of Tennessee. “Having said that, it’s important to recognize that appropriate investment in Tennessee companies is key to Tennessee’s future.”

…Besides employment, the credit generates an annual average of $7.4 million in additional economic activity and $2 million of worker earnings, the consultants found.

…The second-largest business tax break in Tennessee is the Jobs Tax Credit, which cost the state an average of $52.1 million annually from 2011 to 2014. It gives companies a credit of $4,500 per job, with enhancements depending on how much a company invests in the state and where it locates.

Consultants found the jobs credit had a broader economic impact. When taking into account the ripple effect, the jobs credit generated an average of 600 jobs per year, according to the report. That equates to about $87,000 per job.

State putting $12M into St. Jude Children’s Hospital expansion

News release from the governor’s office

MEMPHIS, Tenn. — Tennessee Gov. Bill Haslam and Economic and Community Development Commissioner Randy Boyd on Thursday announced that the state of Tennessee, along with the city of Memphis, will invest in public infrastructure surrounding St. Jude Children’s Research Hospital in Memphis.

 

The state will invest $12 million in FastTrack funding to improve the public infrastructure surrounding the St. Jude campus in downtown Memphis, which will complement the research institution’s expansion efforts announced in 2015, and will eventually lead to the creation of 1,800 new jobs in Shelby County.

“St. Jude is known around the world for its research and treatment of catastrophic childhood diseases and is an anchor institution in our state and we are proud it calls Tennessee its home,” Haslam said. “It means a great deal to be able to assist this world-renowned facility by supporting public infrastructure needs that will help St. Jude not only create new jobs for Tennessee, but increase its capabilities to conduct life-saving treatment and research.”

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Comptroller: TN taxpayers losing money on $200 million TNInvestco program

News release from state comptroller’s office

A performance audit from the Tennessee Comptroller’s Office has revealed the State of Tennessee has only recovered $5.3 million of its initial $200 million investment in the TNInvestco program.

The TNInvestco program, which started in 2009 and 2010, is described as a public-private venture capital program intended to help start-up companies create jobs and for the state to eventually receive a return on its investment. As of December 31, 2015, the State of Tennessee has only received 2.6% of the initial investment.

The TNInvestco program will continue until 2021, and the state should recoup more of its investment; however, the department will likely not receive a return nearing $200 million. Although state law does not require any level of recovery, auditors recommend the Department of Economic and Community Development (ECD) regularly report the amounts returned to the program to the public and the Tennessee General Assembly.

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ABOUT THIS BLOG

Former Knoxville News Sentinel capitol bureau chief Tom Humphrey writes about Tennessee politics, government, and legislative news.

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