It could be called the Volkswagen Effect.
Nearly four years after the devastating loss of a Volkswagen manufacturing plant that could have brought $1 billion to the area, a legislator has introduced a bill that could prevent future losses.
In July 2008, a 1,500-acre site in Huntsville city limits at Greenbrier in Limestone County was one of two finalists for the Volkswagen plant's location. Chattanooga won the bid, largely because of incentives offered by the state of Tennessee, and opened the plant in May 2011.
The loss of the potential for more than 2,000 jobs in an ailing economy stung residents and development officials.
"The city of Huntsville learned valuable lessons in the Volkswagen recruitment process," said Sen. Arthur Orr, D-Decatur. "If there were another large-scale economic development project seeking a large site and offering well over a $100 million investment, having this additional financial capital would increase Huntsville's recruitment efforts with the possible incentives the city could offer."
Now, with rumors that Audi is scouting sites for a plant in North Alabama, Orr hopes to make sure Huntsville and Limestone County remain competitive.
"The amount the state of Tennessee was able to offer Volkswagen far exceeded what Alabama could do because state budgets and the bond capacity are currently stressed," Orr said. "It's more important that county and city governments assist all they can with any future economic development projects. It gives the city of Huntsville and Limestone County another arrow in their quiver to bag a big manufacturing facility."
Senate Bill 470 would allow cities and counties to rebate a portion of property tax revenue -- the amount gained by an increase in land values when industries build -- to help fund private facilities for those manufacturers.
The bill initially included provisions only for Class 3 municipalities to offer the incentives -- in Alabama, only Huntsville and Montgomery -- but an amendment approved Wednesday by the Committee of Finance and Taxation allows any municipality to take advantage of the law. The bill is expected to go before the full Senate at the first of next week.
"This bill is on the fast track," Orr said.
Orr said the bill essentially broadens the existing tax increment funding (TIF) law -- which stipulates municipalities may offer tax incentives to build public infrastructure for companies, such as sidewalks or streetlights -- so that taxes can be used to build private facilities, as well. That means the government of a municipality such as Huntsville, with approval from the impacted county, can offer to fund a building such as a training center or other facility for a manufacturer, as long as the industry would invest $100 million or more to the local economy.
"Greenbrier is not certified as a TVA mega-site at this time," Orr said. "If the city and county came together they could declare it a TIF district if this bill passes."
The bill allows for creation of TIF districts of 500 acres of more for major industries, including automotive manufacturers.
The bill states: "It is in the best interest of the state to ensure the location and expansion of automotive, automotive-industry related, aviation, aviation-industry related, medical, pharmaceutical, semiconductor, computer, electronics, energy conservation, cyber technology, and biomedical industry manufacturing facilities in this state."
The incentives would automatically cease after 20 years but Orr said if the cost of a building was recouped by the increase in taxes after, say, seven years, the city and county would then begin adding the increase into their coffers.
"After that has been paid out, the increased tax is forevermore the city's and county's," Orr said. "They forfeit at the beginning but reap long-term benefits."
Orr said government construction of any private facilities under this law would require approval from officials of the city and county in which the site is located.
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