Since we’re grounded back in reality, how can you suggest that giving TK 30 years of income tax credits (or any type of tax reducing incentive) doesn’t hurt Alabama? I guess the state should stop collecting taxes from all new businesses in the state. By your logic if they never came here in the first place we wouldn’t have missed the revenue. Same goes for any individuals who move to our state.

To reiterate, I’m all for eliminating corporate taxation, but it should be done fairly and without any preferential treatment.

“Alabama’s officials don’t include this figure because there is no income tax credit available to ThyssenKrupp if they make no profit during any of the next 30 years. If there is profit, then the 5% in income taxes that would normally be paid to the State are instead kept by ThyssenKrupp to pay for plant construction and equipment costs. Personally, I have less of a problem with this . . . if the same tax credits are given to all businesses and employers in the State of Alabama. Not just those who are politically powerful enough to get them.”

Real Tim, It seems that the value of the AL income tax credit falls within a large range, so I’m willing to cut Mo slack for his number.

If TK estimates that the value of the credit makes Alabama’s offer better than LA’s, that would explain to me why TK went with AL’s ‘underbid’. I’ve been puzzled by why TK took our ‘lower’ bid.

I guess it comes back to having to trust that Gov. Riley would only agree to this if it was beneficial to the state. I’m uncomfortable voting for personality, but Riley does have a good record of leadership.

As Mo mentioned in his response to Reactionary, the $811 million subisdy number that Alabama has been touting is inaccurate. For example, they aren’t including the value of income tax abatements/credits (call them whatever you want) for the next 30 years. Louisiana included “industrial tax exemption and Quality Jobs tax credits” in thier total incentive number.

From AL.com (cached version):

State officials said Alabama’s package includes $461.1 million in direct financial aid, including land acquisition, site preparation, worker training, and road improvements.

Abatements of sales, property and utility taxes by state and local governments will be worth an estimated $350.3 million.

In addition, the company won’t have to pay any state income tax for the next 30 years unless its tax liability exceeds $185 million in any year. Surtees said it’s impossible to calculate the impact of that benefit because it’s unknown what profits the company might make.

New Orleans Times-Picayune

State reveals details of Thyssen offer
sMay 15, 2007 08:00AM
BATON ROUGE – Right up until the last week of negotiations, Louisiana’s economic development team was hammering out the details of a nearly $2 billion package of state incentives in its failed attempt to lure a German company’s steel plant to Convent, according to documents released Monday by the Department of Economic Development.

As the talks entered their final stages, the state did not have all the property for the potential plant site locked up in option contracts, an issue that appeared to concern officials with ThyssenKrupp AG, according to state documents and one of the property owners.

An agency attorney, however, said the property acquisition was not an obstacle to a deal.

The company on Friday picked a site north of Mobile, Ala., over the St. James Parish location for the coveted $3.7 billion project, which will employ 2,700 workers.

Once freed of its confidentiality agreement with ThyssenKrupp, the Louisiana Economic Development Department on Monday released copies of correspondence and of the proposed agreements traded between state and company officials.

The documents provide the most details to date of how far state officials were willing to go to win the plant and reveal some of the proposal’s hang-ups.

The overall state incentives could be described as a $1.7 billion to $2 billion package, depending on how its components are counted.

Combining state incentives with corporate investment, the overall project in Louisiana would have been valued at $5.5 billion, according to department figures.

The company was ready to guarantee that it would employ at least 1,700 full-time employees plus 300 contract employees by 2013 or else pay a penalty to the state of $550,000 for each job below that threshold.

The jobs guarantee was well below the total number of workers the company was saying publicly it would hire. State officials said they expected ThyssenKrupp would create at least 2,700 jobs, but the company wanted a cushion on the guarantee.

The state was prepared to pay $1.1 billion in so-called cash incentives, which would have been used to pay for a variety of infrastructure components, including: $462 million toward the company’s capital budget and site preparation; a new $210 million port terminal on the Mississippi River at the site; $100 million in nearby road improvements; $261 million in electricity infrastructure and power lines; and $49 million in site acquisition.

The state would have been responsible for most of those projects. If the final costs of the projects list came in under $1.1 billion, then the company could keep the difference in cash. If the projects exceeded $1.1 billion, the company would have had to reimburse the state for the difference.

In addition, the state was offering an industrial tax exemption and Quality Jobs tax credits worth $700 million over time. State attorney Richard House said the value of those tax breaks measured in accounting terms was $500 million in current-year dollars. The state was also offering $40 million toward job training.

The state ran into a obstacle when the company wanted the 10-year tax exemption extended to 20 years, according to the documents. Louisiana law would not allow the extension in the manner the company wanted, so the state came up with a twist to make up the difference.

For years 11 through 20 that the plant was in operation, the state would have set aside the tax payments in an economic development trust fund up to $200 million. The company would have been able to use most of that money toward a plant expansion.

Although the company was allowed an industrial tax exemption that included a 10-year waiver on property taxes, including school taxes, state officials were attempting to convince ThyssenKrupp to make a contribution to the St. James Parish school system. State officials recommended either $5 million annually or one-fourth of the amount the company would have paid if property taxes had been applied.

State officials said this amount was comparable to what the company was likely to pay toward schools in Alabama, according to the documents. It was not clear from the documents whether the company would have agreed to those terms.

The company was demanding that the plant site be elevated to the 500-year-flood plain, requiring compacted soil to add up to 10 feet of higher land, and certain levee and other measures to prevent flooding and to accommodate drainage. The documents show that state officials were concerned about these and other demands by the company that were driving up the cost of simply getting the site ready for the plant.

In a letter to the company, state Economic Development Secretary Michael Olivier said considerable costs to the project could be saved if the company were willing to consider “slight adjustments to site elevation” and “alternative flood protection means” as well as different piling length and load specifications, a reduction in port requirements and changes to specifications in “many other areas.”

Company officials said Friday they were unable to compromise their standards on the site preparation.

The state was dealing with three landowners who held the great majority of the nearly 4,000 acres of property for the plant site. The state intended to buy the land through the Port of South Louisiana. One of the property owners was the port itself.

Another was Entergy Louisiana, which owns 2,891 acres formerly known as Wilton Plantation. The company bought the land for $15 million in 1980. House with DED said negotiations were still under way with Entergy on a final price, but there was no concern about obtaining the land. Port Executive Director Joel Chaisson said the state had reached a price point with Entergy.

Another land owner was Schexnayder Industrial Services Inc., which holds about 900 acres near Convent. The company is owned by Carroll Schexnayder, who runs the business from his home address in nearby Paulina. Schexnayder said Monday he had agreed to an overall purchase price of $15 million. But he had asked the state for $25,000 to secure a six-month option to purchase his land, and the state would only offer $2,500, so the option contract was never signed, he said.

“The state was too cheap to put up a couple of dollars to show they were serious,” Schexnayder said.

He said his attorney had told him that ThyssenKrupp officials wanted the land locked up with an option.

House said the lack of an option was not an obstacle to a deal and that the state would have immediately bought the Schexnayder’s land.

Chaisson said all the major properties for the plant site were in his opinion secure. Some minor properties were left hanging without a purchase agreement, such as Hymel’s Seafood Restaurant on the plant site, he said.

During the plant talks, Louisiana officials knew they were bargaining for a project bigger than the $2.9 billion investment that the company had revealed publicly in the months before the final decision. State documents refer to Project Compass, which was the code-name of the initial plant, as well as Project New Start, an expansion upon the originally announced facility. In fact, the company on Friday said its investment would be $3.7 billion, reflecting a larger plant facility.

The state and local government obligations toward the project included a variety of odds and ends, including: relocation of gas pipelines across the property; wetlands water mitigation at a cost of $16 million; water supply at a cost of $1 million; a waste-water discharge system; support for a fire station, with $10.7 million mainly for training over 10 years; and assistance with employee relocation expenses.

The state agreed to conduct a study on the impact of noise from the plant construction and to provide the names and addresses of all residents living within a 5-mile radius. The state would have assumed responsibility for dealing with historical and cultural resources and well as cemeteries on the property.