The Volkswagen scandal is a wakeup call for public money accountability
Volkswagen’s emissions scandal has dominated business news worldwide. Chattanoogans are paying particular attention. We are concerned about family and friends who work at the local plant. We are concerned about our investment as city, county, and state taxpayers.
Taxpayers gifted Volkswagen about a half a billion dollars in various incentives, with the expectation that VW would meet its lofty projections for jobs and investment. We hope that current corporate criminal circumstances will not affect operations at our plant.
We expect our elected officials to do everything in their power to hold the company accountable for meeting its prior commitments. We also expect them to view this situation as a wakeup call to improve clawback language in future tax-break agreements.
Our local tax-break program is fundamentally flawed, because the city and county do not restrict incentives to projects that both involve significant public benefit and likely would not happen without the subsidy. However, VW did pass both of these tests. Their projected jobs and investment and potential to attract suppliers made them a potential game-changer. Also, we knew that we faced intense competition from other states for the initial location.
But the incentive package for VW turned into the largest tax break given to an auto plant in the United States. The local property tax breaks last for 30 years, which is a very long time for a PILOT agreement. Last year alone, the city and county did not collect $8 million in taxes that would have been paid if the company were on the tax rolls. The 2014 PILOT agreement for the SUV expansion has not yet kicked in.
In addition to more property tax breaks, Chattanooga and Hamilton County agreed in 2014 to pay VW a “Capital Reimbursement Grant” as part of the incentive package for the SUV expansion. This component is particularly troubling in light of recent events.
Our elected officials agreed to provide grant funds “for the benefit of the company” in the amount of $52,500,000 to fund the expansion. The city and county paid VW $40 million last year, with the remaining $12.5 million due this year. Who will negotiate for the public in trying to recapture this money until we know that the expansion will go forward and our investment is protected? I hope it is not the same people who wrote or reviewed the one-sided “memorandum of understanding.”
Accountability for Taxpayer Money (ATM), a grassroots citizens group, is calling for a moratorium on future PILOT tax breaks until the city and county retain an independent professional to recommend meaningful policies and procedures. We need strong criteria to determine which projects get tax breaks. We need strong clawback language in the agreements to make sure that a company upholds its end of the bargain or else taxpayers have some money back protection.
It is time for the public to be represented at the negotiating table.
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Helen Burns Sharp is the founder of Accountability for Taxpayer Money (ATM).