Above: Richard Holder, NN president and CEO
NN Inc. will pay 67 percent of 2019 property taxes due on its former headquarters in north Johnson City – rather than zero – after falling 107 jobs short of a tax incentive-related requirement. That will amount to approximately $113,000 and includes assessments on real estate and personal property.
The company recently announced it would eliminate its remaining Johnson City corporate workforce by July. NN submitted its Annual Performance Report to the City’s Industrial Development Board (IDB) late Thursday, which indicated 63 employees remained at the Johnson City location as of March 9.
“NN had added 72 jobs when they chose to relocate in 2018,” Northeast Tennessee Regional Economic Partnership CEO Mitch Miller said. “Our preference certainly would have been for NN to remain in Johnson City and create the 200 jobs they projected back in 2014, but the protection in the PILOT put forth by the IDB is the reason we will see the property taxes paid this year.”
In 2017, partly in response to “general concerns about PILOTs,” the Tennessee General Assembly directed Tennessee’s Advisory Commission on Intergovernmental Relations to complete a study of PILOT agreements, including what the economic benefits to counties and cities are from the use of PILOT agreements.
The study found “it is not uncommon for PILOT agreements to be reevaluated because a (company) is missing jobs, wages, or investment projections,” the study found. As in NN’s case, penalties are “forward looking,” allowing IDBs to reduce, restructure or eliminate only future promised incentives. NN’s PILOT has been in effect since the 2015 tax year, but 2019 is the first year the performance report affects NN’s local tax liability.
Miller said PILOT agreements are a necessary and widely used tool in the competitive landscape of job recruitment and retention. Some recipients don’t perform, making the agreements’ structure important to protect the affected communities.
The IDB and local governments continue to refine the local PILOT program. “We want to use PILOT agreements selectively, when they make sense based on a thorough vetting of all the factors,” Miller said.