Friday, February 12, 2016

Watchdog questions tire plant deal

The story below is reprinted from with the permission of reporter Steve Wilson: 

The Mississippi Legislature passed an incentive package Thursday that will provide $274 million to build a $1.45 billion tire plant west of Jackson and convert a port facility in Gulfport for use by an offshore services company.

The two facilities would employ 3,500 people. The tire plant would be the largest economic development project in the state’s history.

Continental Tire will build a more than 5,000 square foot plant in Hinds County near the city of Clinton and will receive more than $263 million in bond money for construction and infrastructure. Production at the plant, which would employ 2,500 people, is supposed to begin by 2020. The state will also provide money for workforce training.

In addition to the bond money, the company will receive a 25-year income tax exemption and breaks on both property taxes and the state’s corporate franchise tax. Continental’s corporate franchise tax will be capped at $25,000 per year. Typically, the tax is levied at a rate of $2.50 per $1,000 of capital or property, whichever is greater.

Topship LLC, an affiliate of Edison Chouest Offshore, will employ 1,000 at its new shipyard in Gulfport on the Industrial Canal, which was formerly owned by Huntingdon Ingalls. It will receive $11 million in bond funds to build its facility.

House Ways and Means Committee Chairman Jeff Smith (R-Columbus) said the deals’ clawback provisions — which theoretically would allow the state to recover its money if the companies’ plans don’t work out — were among the most rigorous he’d seen on economic development projects. But those provisions are not in the legislation. Instead, Smith said, they would be in a followup memorandum of understanding between the companies and the Mississippi Development Authority.

Russ Latino, the state director of Americans for Prosperity, said the incentive package, in the works since 2014, amounted to picking winners and losers by the state government.

“Mississippi is using taxpayer dollars and taxpayer-backed debt to give private corporations huge incentive packages that are reserved for a select few,” Latino said. “These deals tend to make big splashes when announced, but they often end in unfulfilled promises, and in the worst cases, hundreds of millions in losses on now belly-up businesses like the beef plant and Kior.”

Smith acknowledged that the state has had a few “hiccups” in economic development in the past.

Those hiccups include the infamous beef plant in Yalobusha County, which cost the state more than $50 million in guaranteed loans, and biofuel producer KiOR, which owes the state more than $69 million on a no-interest loan.

Gov. Phil Bryant called a special session for Thursday to debate the incentive package. The 196-page bill that many lawmakers saw for the first time the morning of the special session sailed easily through the House, with only three no votes.

In the Senate Finance Committee, state Sen. Hob Bryan (D-Amory) peppered MDA Director Glenn McCullough with pointed questions about the cost-benefit studies of the incentives, both for the two most recent projects and for past projects.

“It’s the same thing that happens every single time ” Bryan said. “There is never an opportunity to sit back and look rationally at what we’re doing, what our policies are and is there any amount of money we will not pay somebody to put something in Mississippi. Institutionally, we need more information, we need it quicker and we need to be able to sit and digest it.”

Nevertheless, Bryan ended up voting for the package. Only three senators voted against it. The governor is expected to sign the legislation.

The bond funds for Continental and Topship would be allocated over time, dependent on the companies meeting their job creation goals. Continental would have to have 500 employees hired by 2019 or the contract would be voided, with the company paying back the funds. If the company doesn’t have all 2,500 it promised to employ by 2028, that would also void the contract. The property would revert back to the state.

Topship will have to create 500 jobs to receive the first $5 million and 500 more to receive the remainder.


Anonymous said...

Butler Snow does all bond work and makes hundreds of thousands in fees.

Butler Snow helped arrange all the details by the thousands of hours and millions in fees.

Butler Snow will try to get labor and employment work, corp work, and work elsewhere.

Not bad for those few...the hell with the rest of you.

Proofreader said...

5,000 square feet (in paragraph 3) isn't very big for a tire plant. Let's hope that by "more than," they mean way, way "more than" 5,000 square feet.

Anonymous said...

Never underestimate the power of Butler Snow. They control state government. Philly is their bitch.

Anonymous said...

So, 11:26, are you objecting to the law firm or the work they're performing? At the end of the day, when projects are being formulated, SOMEONE has to do this work........

Anonymous said...

Somebody will have to do the bond work, and they will make fees for doing so.

If Continental Tire hired an attorney to work on this project, that firm probably did make some good fees, but I would bet the farm that it didn't even approach a hundred thousand, much less a million in fees.

I am sure that Continental Tire will have multiple 'local' attorneys to work with their staff of attorneys that do labor, employment, etc.

Twenty five hundred people will be employed at Continental - guess that means to hell with everyone else. No wait, there will be several other businesses in the area that will benefit - restaurants, service industries, suppliers, local vendors. Guess that is to hell with whatever is left.

Sour grapes 11:26? Just because you don't happen to like one - note, ONE - of the large local law firms?

Anonymous said...

I think it's 5.2M square feet. Typo in the article. It's to be bigger than Nissan.

The Alternative is Unemployment said...

Nissan's plant is one mile long and well over a million square feet. And the 'tar plant' is the largest project ever?

Latino says 'these things often go bad' paraphrasing? OFTEN? He cites two out of thousands of projects across this state over sixty years since the BAWI program was rolled out.

I'm guessing the original Ingalls project still tops all of them when considered cumulatively. Millions on top of millions in income for folks employed there over the decades.

On the other hand, this 'clawback' thing Smith touts is ineffective when a company hits the road. Look at what Oreck, the vacuum cleaner company, did in shafting this state on the coast, when Katrina hit. They had signed on more dotted lines than you have in a book of checks. Still, they shit on us, left hundreds unemployed and went to Tennessee, not fulfilling their obligations to this state and not repaying a dime. I haven't seen Gee-Uhl Fai-Uhr touting those machines lately on TV.

Anonymous said...

Going to be an explosion of housing starts in Clinton, Byram, Western Hinds and Warren counties due to Continental. None will be in Jackcrapistan. They had their chance and squandered the opportunities.

Anonymous said...

Betting that 11:26 and 11:41 are the two Ridgeland attorneys who were not hired by Butler Snow. They have made it their mission to oppose any and all that Butler Snow represents.

Anonymous said...

Possibly Western Hinds and Warren will benefit. Clinton and Byram are merely Jackson Jr. at this point. No one, other than the very few super rich or the very many super poor, are moving there.

Anonymous said...

All of Hinds - including Jackson - and Warren will benefit. Many people in Vicksburg are driving to Nissan to work now. Some of these will shift and move to Continental. Folks throughout Jackson (even though the haters on here don't think there is anybody in Jackson except thugs and friends of Kenny) will benefit. Clinton will get more employment, much more housing, and millions of new taxes - yes, Russ, even with the incentives.

As to the size - it is five million square feet - multiple times the size of Nissan.

and to 12:33, don't think MDA was putting clawback clauses into these deals prior to mid-2000s. So not sure your Oreck example counts for much.

Anonymous said...

To reach all the projected jobs, about 30 years of total success is required.For sure all front end money will be spend by State and few hundred jobs will created over the next 3 years. About 25 to 30 % of what is projected will happen but the right people will get their large fees.

Anonymous said...

While I am for economic development, I think we, or our law makers, should learn from past failures such as the beef plant and Kior.

How much is the State actually getting on the return, if everything goes perfectly. Edison will employ 1,000 workers, and are getting $11,000,000. That is $11,000 for every one employee.

Want to invest in the future? Why not take $11,000,000 and sponsor scholarships. The state could fully fund 220 four year degrees, and no telling how many technical degrees.

Anonymous said...

I believe that the Jackson office of Jones Walker (what remains of the former Watkins, Ludlam, Winter and Stennis firm) represents Hinds County in the bond issue. Should be a sizeable fee, but bond work is not the honey pot it used to be.

For what it's worth, I read that Butler Snow is representing the issuer of the $700 million in bonds for the new Atlanta Braves stadium. Not bad for the only truly large law firm that started as a Mississippi firm and did not get acquired by an out-of-state firm. One option for the haters here would be to back up and consider offering at least a modest amount of congratulations.

Anonymous said...

2:15 - check your 'facts". You must be reading a Latino's commentary rather than the statements that came along with the bond deal. It doesn't take 30 years for continental to get to their 2500 employee operation; think it was 5. Only a x6 miscalculation but hey, no prob.

Anonymous said...

Wow, lots of Butler Snow ("BS") defenders on here today. I work at another large Jackson firm, and BS is basically evil. Don't defend them unless you work there and your paycheck depends on it.

Anonymous said...

Jackson is LOST. Goner.

Anonymous said...

1:35....regarding your Jackson Jr comment...where do you live so that you never see any middle class people or blue collar people or black people? Switzerland? Certainly not anywhere in Mississippi.

Anonymous said...

Not going to render a firm opinion on these two deals in particular, but I do feel compelled to make one comment: for those who are comparing these two incentive packages to Kior and the beef plant, it should be noted that Continental Tire is a massive international corporation that generated over $38 billion in revenues in 2014. Edison Chouest, while not nearly as big, is still a large, established company that has been in business for over 50 years (privately-owned, so no financial data). These two would be more similar to Nissan, Toyota or PACCAR than to Kior or the beef plant, which were both thinly-capitalized, new ventures.

Anonymous said...

4:24 while I have absolutely no love lost for B/S, I am amazed at the folks that want to automatically assume a deal is crooked and that B/S is involved, just because there is a deal.

Plenty of other 'well connected' law firms in town. Plenty of others that are playing in the arena as well.

Anonymous said...

All the bubba's that have moved to other counties....let it be. Go do your thing. Why are you so consumed with trying to run down Jackson? Enjoy your suburban life but why spend all day long on a blog ripping people that enjoy living in Jackson?

Anonymous said...

@5:08PM, the stupid comparison to KiOR above wasn't even worth the rebuttal but thank you for making the effort.

Anonymous said...

Not a very friendly competitor, 4:24. "Evil" is a very strong accusation. Whatsamattah, they wouldn't hire you so you went across town to hold a grudge?
P.S. I don't work there.

Suck A Bowling Ball said...

1:55; Check your (lack of) facts. When Oreck failed to perform and left the state, violating its contract, there was quite a bit of hooplah about that, but, nothing could be done. The 'clawback' thing has claws but no teeth when a company pulls up stakes and moves across the state line. Nice try, though.

Suction This said...

Oreck was never a good neighbor.

Anonymous said...

Continental will break ground in two year. First tire to be produced in November 2019 with 500 employees.

The 2500 projection is if all goes well by 2028, just 12 short years from today.

Anonymous said...

Good neighbor or not, the point is that there was a deal with the state. The state gave up a bunch of money and Oreck reneged on it's contractual obligation to stay in the community. Spin it however you like....fact is, the clawback has been de-clawed. Jeff Smith needs to stick to mustache wax and gazing in mirrors.

Anonymous said...

Well, if every one of the 3500 made $40000 a year and contributed 100% of that money back into the economy. That would only be $140 million when they are at max capacity. If they fall into the average tax paid, that would only be $22 million a year at max capacity. And, we all know that would be a high average in a tire plant.

You get a short term boon from the construction and related sales. But, we know these are not going to average to $40000 a year as many jobs in this industry will be minimum wage.

So what formula are they using to make these numbers good for Mississippi? And, who came up with the formula?

Odd that you can find everything but that on the Internet. Surely, someone has come up with a way to do the math on a break even. If the powers that be don't have a working formula, they need to before committing to any agreement and if they do have one, they should be able to share it.

Anonymous said...

Scuze me 1:54. You are equating one year's results from the employment to a plant that will be in Hinds County for decades. There are plenty of places on your all source of knowledge - the internet - that shows most people (evidently needs to be put into simplier language for you) the 'formula' for making "these numbers good for Mississippi".

The average pay (2017 dollars) for the tire plant is to be $40k/year. Not one year, but multiple years. (The average pay for the construction you reference will probably be slightly more than that but those numbers aren't really relevant.)

Part of the $265M 'incentives' goes to infrastructure - you know, those things like roads, bridges, water, sewer, etc. - that the government puts in place for any business. Part of the 'incentives' goes to job training.

As to that 'formula' you reference, evidently you didn't take economics in high school, much less read about it while you were flipping burgers. The dollars earned have a turnover value in the economy; I'll try to make this simple for you. The employee makes a dollar; he spends it at the barber shop; the barber then spends it at the service station; the service station owner then spends it at the grocery store when he buys groceries for his kids. Get it?

The benefit to getting jobs in the economy isn't from the taxes paid from those employees getting the jobs. Go back and study up a little bit before you type into that keyboard again.

Anonymous said...

2:55. Why don't you go join up with Donald and his campaign? You think you can say it often enough and it will make it true.

- There was not a "contractual obligation" to stay in the community.
- There was not a "clawback" provision contained in the tax exemption that the company received.
- There was not a 'deal with the state' that the company did not meet.

Spin it however you like - Oreck might not have left with a good taste on the folks in Long Beach's mouth, but there was not a violation; there was not something the state shoulda/coulda done to get back some benefit you claim they received.

I don't give a damn about Oreck. I'm not from LB. I don't really care about Oreck. But folks like you that try to make things up out of whole cloth to prove points that don't exist just don't deserve to get by with writing their own novels when they just want to bitch.

Anonymous said...

But folks like you that try to make things up out of whole cloth to prove points that don't exist just don't deserve to get by with writing their own novels when they just want to bitch.

Folks like you are the problem with the Mississippi Republican Party.

Anonymous said...

1:54...evidentally, you don't know too much about construction. Minimum wage?!?!? There isn't a job on a site that is anywhere close to minimum wage. Day laborers make twice that. Skilled craftsmen make 3x to 10x the minimum wage. I have worked on similar projects and the short term (3-4 years or more on this size project) impact can be very significant.

Speaking of good jobs. It is shame so many of our yutes are afraid of work. The construction industry is a way out of poverty if guys would just work.

Anonymous said...

The construction of the site will mostly be done by illegals. Just a fact. They will try using citizens of the U.S. but will be forced to hire illegals to get the work done.

Oreck Sucks said...

Why the hell would Jeff Smith, disguised as 6:43, defend Oreck's shafting of the state after the state (not to mention the community) had given so much to the Oreck empire over months of negotiations and deal making. The state bent over backwards to locate this plant on the Mississippi coast.

After Katrina hit, the community and the roughly 500 Oreck employees hitched up their britches (as HB said) and saved this plant's bacon, putting Brother Oreck back on his feet. As soon as that got accomplished, Oreck left town. Of course it was purely coincidental that the state's part of the bargain, the tax abatements promised and granted, were on the very verge of expiring.

No need to hang around any longer. Oreck had milked the state and the community for every nickle it could get. Now, on to Tennessee for another milking. And another bargain: Jobs for people ~ tax abatement for Oreck.

Anonymous said...


I saw in the paper today that the percentage of people employed, or seeking employment, in MS is less than 60%. Blew me away!

Huh?... said...

8:19 Your post makes no sense. Can you back up and start over using terms with which you are actually familiar?

Anonymous said...

12:38, he/she at 8:19 is saying more than 40% don't work and don't want to.

Anonymous said...

Just one look at the number on govt. benefits will tell people that there is a lot more than 40% that don't work and don't want to.

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