Borrowing, tax breaks approved for tire plant, shipyard

Mississippi lawmakers have agreed to borrow $274 million and provide millions in tax breaks to land a tire plant in Hinds County and a shipyard in Gulfport expected to create a combined 3,500 jobs.

Continental Tire the Americas plans to begin in January 2018 building a $1.45 billion, 5 million-square-foot plant to make industrial tires. As part of its deal with the state, the plant off Interstate 20 between Clinton and Bolton will employ 500 people by the time it opens in 2019 and 2,500 people by 2028.

“This has been a long, but successful journey, two years in the making,” Bryant said Thursday of the tire plant deal. “…Continental is telling us this will be the center of Continental’s universe. This will be the plant they bring their customers to see.”

Edison Chouest of Louisiana plans to invest $68 million in its Topship yard on the Industrial Seaway in Gulfport, part of the State Port of Gulfport’s planned “inland port” expansion. Topship makes service and supply vessels for offshore oil and gas exploration rigs. The company plans to complete construction by 2018 and create 1,000 jobs.

Bryant and Mississippi Development Authority Director Glenn McCullough Jr. said the combined projects mark the biggest single day in economic development in state history.

Bryant and economic development leaders said the tire project will provide jobs badly needed in the struggling Hinds County and Jackson area. They said the maritime project will nearly fulfill jobs requirements the state must meet from a post-Katrina, $570-million federally funded Port expansion lest it face “de-obligation” and have to pay back hundreds of millions of HUD funds.

Vicksburg Mayor George Flaggs was at the Capitol on Thursday in support of the tire plant project. He said the plant’s economic benefit will stretch well beyond western Hinds County and the metro.

“Our industrial park, our port, jobs and spinoff business and jobs — this will help Vicksburg and Warren County, too,” Flaggs said. “This is the best thing to happen to central Mississippi in my political career.”

The deals were presented to and passed by lawmakers in a one-day special session and in a single bill, with little debate before floor votes.

The state will borrow $263 million for the tire plant and help with site acquisition and prep work, roads and other infrastructure, workforce training and help with building costs. Hinds County will pay off $20 million of the debt.

The state will borrow $11 million for the port project to help with infrastructure, workforce training and other costs, coupled with $25 million in federal port money.

Some questioned the amount of incentives, and whether taxpayers would be protected if the projects fail. Others wanted assurance that minority-owned businesses would be considered for construction. Others questioned why their home areas haven’t landed such economic development. Others lamented they hadn’t been provided details or enough time to study the nearly 200-page bill that contained borrowing and numerous tax breaks.

But the deal cleared the House by a vote of 118-3 and Senate 48-3.

“Is there any amount of money we will not pay somebody to come put something in Mississippi?” Sen. Hob Bryan, D-Amory, asked in a Senate Finance Committee meeting on the bill. “… Can I ask questions about it without being accused of violating whatever button the (Mississippi Economic Council) is handing out today?”

MEC leaders were handing out buttons before lawmakers voted that said “Let’s do it,” and afterward that said, “We did it.”

In addition to state borrowing, the tire plant will be given 25-year income tax and corporate franchise tax exemptions, sales tax exemptions, and roughly $3 million a year in rebates on employee income tax collections from its expected $100 million-a-year payroll. The company would pay only one-third of normal property taxes to Hinds County and Clinton schools for 10 years.

The shipyard will receive 20-year income tax and franchise tax exemptions, sales tax and other exemptions or rebates.

McCullough said state coffers would see a net positive return on the tire plant after seven years, and positive cash flow from it for 19 of 23 years through 2040.

Bob Neal, a state college board economist, said the state will have netted $487 million from the deal by 2040.

McCullough said the shipyard will provide positive returns to the state after two years, and net the general fund more than $200 million through 2035.

Bryant, Mississippi Development Authority and legislative leaders assured taxpayers are protected in the deals through stringent “clawback” provisions.

House Appropriations Chairman Jeff Smith, R-Columbus, told his colleagues the incentives deals “have the strongest clawbacks we’ve ever had.”

Bryant said he was confident the provisions would allow the state to recoup its incentives, including the money it is borrowing. For the tire plant, he noted, Continental’s parent company in Germany is guaranteeing the incentives.

"We're dealing with Continental Tire, not a new company or something that hasn't been tested," Bryant said. "When the Nissan deal was made, the clawbacks were only for Nissan North America which was new and a small organization for that deal. This guarantee goes all the way back to the home office, in Germany ... Look at their market — they sell to all the major auto manufacturers. Volvo Trucks, Mac trucks."

Rep. Mark Formby, R-Picayune, said the provisions satisfied him the state would recoup its investment if things went wrong.

“In the past we’ve clawed back to companies that failed,” Formby said. “This one would clawback to Germany, all the way to the mother ship.”

Members of the Legislative Black Caucus and others had questioned whether minority-owned and state-owned businesses would be given priority in construction work for the tire plant.

After negotiations between lawmakers, the Governor’s office and MDA, an amendment to the bill added in Ways and Means on Thursday appeared to be a key to its relatively smooth passage in the House and Senate.

The amendment says Continental "shall make commercially reasonable efforts" when it bids out construction work to ensure minority-owned contractors will have equal opportunity on contracts. It says the company will request that prime contractors in their bids include a commitment to have forums to highlight subcontracting opportunities for minority contractors and work with MDA and trade associations to increase their participation. MDA commits in the amendment to provide assistance to eligible minority contractors for the project through its Minority Surety Bond Guarantee program.

Rep. Deborah Butler Dixon, D-Raymond, said she helped work on the amendment deal with MDA and is satisfied with it and pleased about the jobs potentially coming to her district from the tire plant.

"We've got to work together," Dixon said. "Teamwork. It's called teamwork."

Contact Sam R. Hall at srhall@jackson.gannett.com or (601) 961-7163. Follow @samrhall on Twitter.

To contact Geoff Pender, call (601) 961-7266 or follow @GeoffPender on Twitter.

The deals

The Mississippi Legislature approved a $275 million incentive package for two unrelated economic development projects. Both projects include clawback provisions in the case of the company not meeting its conditions.

CONTINENTAL TIRE

What the company will do

• $1.45 billion in private investment
• 2,500 jobs created over five years
• Created jobs will average $40,000/year
• Use minority and local contractors in the building of facility

State incentives

Mississippi has agreed to the following incentives:

• Bond $263 million for Continental construction and infrastructure
• Prepare the 900-acre site for construction of a 5 million-square-foot plant
• Cap franchise tax at $25,000 annually
• Rebate of 3.5 percentage points on income tax

Hinds County and the Clinton School District are also providing incentives:

• 2/3 property tax break for 10 years
• Hinds County is providing approximately 280 acres
• Clinton School District will provide about 635 acres of 16th Section land and will receive 640 acres in return

TOPSHIP

What the company will do

• $68 million in private investment
• 1,000 jobs created over five years
• Created jobs will average $40,000/year

State incentives

Mississippi has agreed to the following incentives:

• Bond $11 million for Continental construction and infrastructure
• Provide option for company to acquire facility