Saving Jobs: Economic developers say “complex” Domtar deal took teamwork
by Scott Robertson
Clay Walker, CEO of NETWORKS Sullivan Partnership and Lynn Tully, Northeast Tennessee director for the Tennessee Department of Economic and Community Development (ECD) knew they were going into a meeting with huge long-term implications for the regional economy when they sat down with Domtar executives shortly after the company announced it was temporarily closing down Kingsport operations during the COVID crisis.
“Generally speaking, but not always, most permanent shutdowns are preceded by temporary shutdowns,” Walker says. “So anytime you have a temporary shutdown, you hate it, because there’s a problem, but it also means it could be a much bigger problem. At the very end of May I thought something was going on because prior to having a meeting, the company asked me, ‘do you know of anybody who can’t sign an NDA (non-disclosure agreement)?’ So, I thought that could be really good news or really bad news, but I knew something big was going on.”
The bad news was that Domtar, which owns the paper mill that has been in continuous operation in Kingsport for more than a century, was indeed going to idle the facility, ending the employment of more than 300 area residents. The good news was that Kingsport was in the running to be the home of another Domtar manufacturing operation, including around 140 new jobs, but it wouldn’t open for another couple of years. Kingsport was facing stiff competition in luring that site, including another existing Domtar facility site, rumored to be the company’s Arkansas mill.
It was apparent that this would not be a run-of-the-mill economic development project. Domtar had very specific needs that neither the local economic development team and city government nor the state ECD could handle by themselves. “Lynn was the point person for the state and I was appointed for the local economic development team,” Walker says. “We set up lines of communication with the people in the company who could talk about all these various issues.”
For the next few months, that communication would be virtually non-stop, Tully says. “This project was one of the most complex projects I have seen in quite some time. A lot of the needs spanned not only multiple state departments, but multiple city properties including some that were in the parks and recreation department as well as other industrial property. It made this project really unique.”
“We worked locally with the city and their review of not just an incentive package, but looking at the properties that would be necessary, any places where rights of way would be needed, any changes to the traffic patterns that would be needed,” Tully says. “We worked with the City Department of Public Works, both with traffic and with wastewater and water delivery. They went out of their way to plan for the new needs of this facility.”
The city of Kingsport was asked not only for that incentive package (a payment-in-lieu-of-taxes agreement which forgives 25 percent of the company’s city taxes from 2024-2037), but also help in working out land swaps. The city and company agreed to a deal in which Domtar gives its Cement Hill property to the city and pays up to $500,000 to assist in the relocation of the Scott Adams Skate Park to Brickyard Park so Domtar will be able to utilize the current skate park land in its future plans.
Says Walker, “Domtar said, ‘We don’t want to disturb any part of the downtown living area and the amenities of the city, but we might have to change some things.’ When we got into those things, Domtar was ready to pony up. So, it was a partnership. The spirit was, ‘Let’s figure this stuff out together.’ I’m so proud of the city – Mayor Pat Shull leading the Board of Mayor and Aldermen and Chris McCartt (city manager) leading his team – they stepped up.”
The city and state will be working together to address traffic pattern changes. While the new operation will come with many plusses in addition to jobs (not the least of which is a guarantee that there will be no “paper plant smell”), it will also come with an increase in the number of large trucks entering and exiting the Domtar property, perhaps to as many as 200 per day.
“We’ve worked with the city and the Tennessee Department of Transportation so those trucks won’t be on Center Street beyond Clinchfield,” Walker says. In addition, other changes may be in the works for Lynn Garden Drive and West Stone Drive, but while those are in the early planning stages today, they’ll not begin until the plant is up and running in 2023, Tully says. “TDOT has worked with our local metropolitan planning organization (MPO), for many years. That is how new road projects get their start. We discussed with them the needs of this new facility, and how those needs are going to change from previous production. There are going to need to be some upgrades and some attention paid to how traffic moves in and out of downtown.
“So, again, working with that MPO locally and the state DOT planning service – they’ve got a long-range planning division – we were able to get everyone to the table,” Tully says. “We talked about everything that we saw as potential concerns. They did some studies and have addressed everything they can at this point. Obviously, we’ve got a lot of work to do as the project gets underway. When the plant is producing its new product, we’ll actually be able to count the vehicle and traffic changes. We will go ahead and prepare ahead of time, but we’re going to verify those counts once the plant has been reopened. TDOT is great to provide industrial access funding where they can to support businesses and support job growth, so they have been great partners.”
The northeast Tennessee delegation of state legislators also got into the act, lobbying for additional state funds for training and workforce development.
“We have a long history of support from the Department of Labor and Workforce Development in our region,” Tully says. “We have so much educational support, both from our TCATs and Northeast State and the Regional Center for Advanced Manufacturing (RCAM) and our other local colleges and universities. We are very well positioned to find and get the training done that is necessary for our manufacturers like Domtar.”
The company, meanwhile, will, according to Walker, “bring in simulators that, working with the Regional Center for Advanced Manufacturing, will benefit the community.” While those training simulators will primarily run Domtar’s proprietary software to train its own future employees, they also will be capable of running other software to allow the RCAM to use the simulators for other regional training and education efforts.
And even though Domtar has already announced its plans to refit the Kingsport facility, the state is still looking for ways to make the training process easier and more cost-efficient, Tully says. “We are looking for funding and opportunities for both on-the-job training and also for apprenticeships or specialty training that the new products will require.”
The refit itself will provide some positive economic impact while the plant switches from paper production to linerboard, Walker says. “There’ll be about 400 people working on that construction. That’s going to have an economic impact over a couple of million dollars.”
Walker says he has heard from cynics who say the net effect of the deal is that the city and state are paying the company to cut 160+ jobs. He understands their point, and is sympathetic to those who will not be hired back. “I don’t know that I’d like us very much if we weren’t bothered by the fact that some good people are losing their jobs. But, I’d rather do my part in having 140 jobs to be replacing than 300,” Walker says. “The long-term picture for the city and its relationship with an incredible corporate citizen overall, though, makes this announcement a pretty good day.”