Update: Conti Plant Incentive Value May Reach $333 Million - Tire Review Magazine

Update: Conti Plant Incentive Value May Reach $333 Million

After an aggressive two-year courtship, the state of Mississippi and Continental AG signed on the dotted line last week, completing a deal that will bring a $1.45 billion, 2,500-job tire plant to the state. It is the Magnolia State’s second tire plant win in five years, and will bring much needed good paying jobs to the state capital area.

But that economic victory comes with a cost. At a special session of the state legislature called by Gov. Phil Bryant last week, lawmakers approved a series of financial incentives needed to “close the deal” with Conti, including borrowing some $263 million for improvements to the 900-acre plant site located near the small city of Clinton, just west of the capital city of Jackson.

The 900-acre plant site will first be home to production of radial medium truck tires, but future expansion on the grounds might see the addition of a passenger/light truck tire plant and/or an OTR tire facility. Various reports have said that construction on the massive truck tire plant will start in 2017 or 2018, with the first radial medium truck tires rolling out in 2019.

State lawmakers last Thursday approved the state and Hinds County borrowing $263 million for improvements to the 900-acre site just west of Clinton.

The Associated Press recounted the list of state and local incentives that went into the entire package, which the news service estimates are “worth at least $333 million.” These incentives “breaks on property, income, franchise and sales taxes, as well as an agreement to pay the majority of state income taxes collected from Continental workers to their employer. A few tax breaks have no expiration date.”

  • Bonds: $263 million to buy land, site preparation, build a worker training facility, and for some of the construction costs. Hinds County will repay $20 million of that amount.
  • Income and Franchise Tax Breaks: $177 million thanks to a state exemption for Continental from corporate income taxes for 25 years and a $25,000 per year cap on the tiremaker’s franchise taxes for 25 years. After that 25-year period, the state will only collect corporate income and franchise taxes on Conti’s sales in Mississippi.
  • Property Tax Breaks: $68 million at minimum, based on AP calculations of Mississippi county property tax rules. In addition, Clinton agreed to not annex the plant site for 30 years, meaning Conti won’t have to deal with city property taxes.
  • Income Tax Rebates: $87.5 million “from state income tax withholding out of worker paychecks at Continental, the company would get 3.5 percent of total payroll for 25 years,” the AP reported. “With announced yearly payroll of $100 million, that’s $87.5 million over time.”

Even with those costs, “figures run by College Board economist Bob Neal suggest the state will come out ahead,” the AP reported. “He said that just subtracting the cost of repaying the bonds, state tax revenue would be $487 million ahead by 2040. Subtracting an additional $265 million worth of incentives would still leave the state more than $220 million ahead.”

“I want us to be the biggest, the fastest, the best – no longer poor old Mississippi,” Bryant told the Jackson Clarion Ledger last week. “I want them to worry about us, be looking over their shoulder and saying, ‘Here comes Mississippi. We better get ready.’

“It’s hard to describe breaking out of the stereotypical idea that Mississippi can’t do what North Carolina or Georgia is doing, can’t compete with Tennessee or Texas.”


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