Breaking News: City will have to weigh in on oversight in tax abatement resolution for NN Inc.
Photo above:Washington County Economic Development Council CEO Mitch Miller, right, and NN Inc. President and CEO Richard Holder
By Collin Brooks
An oversight in a resolution that was passed by the Johnson City Commission in 2014 that allowed the Industrial Development Board of Johnson City to grant tax abates to then “Project Stone” will need to be amended by the city commission in the coming months.
During a monthly IDB meeting on Feb. 16, it was brought to the attention of the board that they would need to look into amending a 2014 resolution granting NN Inc. property tax incentives on its north Johnson City headquarters.
IDM members cited discrepancies between the resolution and accompanying tax agreement regarding timelines of employment level targets. The company had a 5-year timeline with the state of Tennessee that reflected the same numbers that were used in the local agreement, which had a timeline of 2.5 years.
The company was to have 160 employees at its headquarters, they currently have 64 according to annual performance report to the IDB dated Jan. 31, 2017.
“At the end of the day, it would have made sense in the beginning to just sync it up from the beginning like the state does, just like we did with Dentsply and we will do for Mullican Flooring,” Washington County Economic Development Council CEO Mitch Miller said.
The IDB hopes that the city commission can amend the resolution as soon as March 2.
NN Inc. President and CEO Richard Holder seemed to insinuate that it was an honest mistake on all sides.
“It is out hope that, had the parties involved in the documentation of this transaction recognized the discrepancy outlined above prior to the finalization of the documents, the entities would have corrected the discrepancy and included a Ramp-Up that was in lockstep with the five-year Ramp-Up provided by the State of Tennessee,” he wrote in a letter to the IDB board.
He noted that after the company’s annual performance reporting, they noted a discrepancy in the time period which the company had to realize the full employment levels to which it committed in 2014.
“The understanding of the company, and we believe the understanding of the IDB, has always been that the Ramp-Up was five years from the date of the PILOT Agreement (i.e. December 31, 2019),” Holder wrote in the letter. “Which aligns with the company’s Ramp-Up provided by the State of Tennessee under its state-level incentive documents.”
He continued to say that the “size and scope of the Company’s project (200 total jobs) and the time-frame discussed during the projects negotiations in 2014, one year or two-year Ramp-Up were neither practical nor realistic. The discrepancy in Ramp-Up timelines appears to be an oversight in the documentation which was not previously noticed by the IDB, the Company, the City, nor the other parties involved in the transaction.”
The amended agreement would sync the dates that the company currently has with the state, allowing them until the end of 2019 to reach an employment level of 160 at its headquarters before any reductions in its tax incentives could occur.
“It our discussions about a PILOT, NN consistently talked about its five-year plan for growth,” IDB Chairman Gerald Thomas said. “They didn’t even begin renovating the building until late 2014, so it’s rather unrealistic to think they would integrate their corporate jobs and reach the target within just a couple of years.”
The NN. Inc PILOT was the first agreement completed locally in over a decade.
For the 64 jobs that NN Inc. currently employs in Johnson City, the payroll is close to $6.5 million annually, while IDB noted that the economic impact that the company has on the area has been measured to exceed $19 million annually.