German automobile manufacturer Volkswagen is expected to announce next week where it will build its first U.S. plant, an $800 million investment that will create 2,000 jobs. On the shortlist is a site in Michigan and two TVA megasites in Chattanooga and Athens, Ala.
TVA megasites are properties designated by the Tennessee Valley Authority as ideal locations for the automotive industry or other major manufacturing operations. Each site must have a minimum 1,000 acres, be immediately available, have completed environmental and geotechnical testing, be in close proximity to interstate highways, railways and auto suppliers, and have a plentiful labor force.
There are currently three TVA megasites in Tennessee. In addition to the Chattanooga property, there are locations in Clarksville and Brownsville.
The TVA megasites in Chattanooga and Athens are similar in the amount of acreage they have available now or in the near future. Both states have actively recruited Volkswagen with the strong support of political and civic leaders.
And, as is par for the course, there has been plenty of discussion regarding economic incentives for the project. And that is where the bids begin to look very different.
In 1993, Alabama coughed up a $253 million incentive package to lure a Mercedes plant to Vance, between Birmingham and Tuscaloosa. Then in 2002, Korean automaker Hyundai was lured with incentives of more than $118 million. A Hyundai official said at the time that Alabama "was very devoted by offering us various tax benefits."
Those benefits could well make the difference with VW. While the State of Tennessee has been tightening its belt lately, Alabama apparently has money to burn, courtesy of natural gas.
Alabama collects royalties from gas companies that extract natural gas from wells drilled in state-owned waters off the state's Gulf Coast. Granted, Alabama's coastline isn't all that significant in size. But financially, it's loaded.
According to the State of Alabama, royalties from natural gas have pumped $3.2 billion into the state's trust fund. Some officials now want to draw from that pool to pay for incentives should the state land Volkswagen. In order to do that, Alabama voters would have to approve a change to the state constitution in November.
Wherever Volkswagen goes, the incentives package laid out by the winning bidder will be closely scrutinized. All of this also brings to mind the move by Georgia to acquire water rights and move our shared state line farther north. Maybe a trade with them for some of their coastline might be in order.