Continental Tire: The numbers behind the deal

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Gov. Phil Bryant, center, representatives from Continental Tire and state government officials discuss prospects for the company's new plant at a town hall meeting June 21 in Clinton.

Mississippi Development Authority

Gov. Phil Bryant, center, and representatives from Continental Tire along with state and local officials were on hand for questions about the company’s new plant at a town hall meeting June 21 in Clinton.

 

 

A memorandum of understanding between the state of Mississippi and Fort Mill, S.C.-based Continental Tire the Americas, which Mississippi Today obtained through an open-records request, offers new details about the project and its costs, funded in large part by the tax-incentive packages lawmakers OK’d earlier this year.

The future site of the Continental Tire factory in western Hinds County.

Mississippi Today

The future site of the Continental Tire factory in western Hinds County.

In February, during a one-day five-hour-long special session within the regular legislative session, Mississippi lawmakers approved $274 million in bonds for a Continental Tire plant in Hinds County.

All together, state and local incentives will total $600 million, according to an Associated Press analysis. In addition to the bonds, Continental will also receive tax breaks from Hinds County as well as from the inventory and franchise tax breaks.

The company’s parent company, Continental AG, headquartered in Hanover, Germany, had 2015 profits of approximately $3 billion on revenues of $43.5 billion.

As part of its deal with Mississippi, Continental agreed to create 2,500 jobs that pay an average of $40,000 per year. Continental’s overall investment would total $1.45 billion.

In terms of site work, those costs, include:

• An “initial inside-the-fence grant” of $89.6 million from the Mississippi Development Authority to reimburse Continental  for capital improvements, including buildings, fixtures an electric substation and fire protection improvements.

• An “additional inside-the-fence grant” of $241.7 million is available from the state when production has started by Dec. 31, 2019, and Continental has 500 new full-time jobs. However, deducted from that sum will be the costs of the bond issuance, oversight fees and any clawback fees that the company will owe if they fail to live up to certain provisions of the contract.

• $46 million in site preparation and additional foundation work. Of that amount, $41 million is for site prep with the other $5 million for foundation work.

• $42.6 million for engineering, design surveying, inspection, testing and contingency costs for construction of industrial access roads, $30.5 million of which would come from the state. If needed, another $12 million is for potential overruns, to be approved at MDOT’s discretion and from MDOT’s budget.

• $4.4 million to acquire of adjacent parcels of land.

• $5 million for wetlands mitigation. According to an application Gov. Phil Bryant submitted to the U.S. Army Corps of Engineers before the Continental deal was announced, the plant would affect more than 100 acres of wetlands.

• $1 million in oversight fees to hire an independent engineer to oversee Continental’s site work.

• $2 million for railway improvements.

• $3.3 million on water supply improvements.

• $1 million on wastewater improvements.

• $278,000 to the Hinds County Economic Development Authority for project-related expenses incurred before July 1, 2015.

Containental Tire

Recruiting and training costs include:

• $7.5 million to build a new facility for employee training.

• $3.5 million for Hinds Community College to reimburse Continental for training-related travel expenses incurred by company employees.

• $3 million for post-employment customized training, including 2D and 3D applications, animation and gaming.

• $1 million for a workforce and temporary office grant to recruit, relocate existing personnel and new hires (including domestic and foreign travel).

• $1 million for training-center equipment.

• $416,000 for proctoring costs related to employee assessments.

• $170,000 for customized assessment equipment, which would become the property of Hinds Community College.

• $20,000 for reimbursing the company in the event they have to hire outside vendors to provide recruiting, screening/assessment or post employment training.

Supporters of the Continental project have compared it to other industrial economic development projects since 2000. These include Nissan’s plant in Canton, which received $363 million in tax breaks from the state ahead of its 2003 opening.

A recent analysis by Mississippi State University’s National Strategic Planning and Analysis Research Center shows that Nissan has created 6,400 jobs at the plant and 25,000 statewide thanks to the multiplier effect.

The report states Nissan has generated $2.9 billion annually to the state’s gross domestic product and contributed $2.6 billion in disposable income.

Some Mississippi politicians are less than enamored of Continental’s potential economic impact.

Sen. Chris McDaniel, R-Ellisville is one of six lawmakers in the House and Senate to vote against the Continental tax incentive deal, he says, because little evidence exists that large-scale economic development projects are good for states’ fiscal health in the long run.

“Bridges and roads have to be address, state employees need to be addressed and we can’t address them if we’re throwing around corporate welfare,” McDaniel told Mississippi Today.

Clarification: This story has been updated to clarify that several costs can be deducted from the “additional inside-the-fence grant.”

  • Charles Pearce

    With incentives like these, maybe Continental will have more R&D money available for a new super tire designed to withstand our growing number of road hazards.

    • clawso

      You may need them! Another ‘big score’ like this and y’all won’t have any road money. My Arkansas just gave away a like sum to the Chinese to plunder our forests. Progress?