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Taxpayers to pick up part of tab for construction of tire plant, shipyard

By   /   February 4, 2016  /   News  /   No Comments

Photo by Steve Wilson

GIVING MOOD: Mississippi lawmakers will give $274 million in incentives to build a tire plant and a shipyard.

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.

Related: Mississippi Development Authority turns gold into straw with KiOR

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.

Related: Picking tax winners and losers costs Mississippi’s budget

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.

Photo by Steve Wilson

ROLLING: Gov. Phil Bryant’s official vehicle is rolling on Continental tires after the announcement of an economic development deal to bring the tiremaker to the state.

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.

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Steve Wilson is the Mississippi reporter for Watchdog.org. Beginning his career as a sports writer, he has worked for the Mobile Press-Register (Ala.), the LaGrange Daily News (Ga.), Highlands Today (Fla.),McComb Enterprise-Journal (Miss.), the Biloxi Sun Herald(Miss.) and the Vicksburg Post (Miss.) Steve's work has appeared on Fox News, the Huffington Post and the Daily Signal. His bachelor's degree is in journalism with a minor in political science from the University of Alabama. Steve is also a member of the Mississippi Press Association and Investigative Reporters and Editors. He served four-plus years in the United States Coast Guard after his high school graduation and is a native of Mobile, Ala.