No WhiteWash!

MeadowView had its grand opening on August 18, 2009 for the expanded hotel that is adjacent to the City of Kingsport Convention Center.  There has been some confusing statements made in the Kingsport Times-News articles below.

There are conflicting statements as how much Meadowview has brought to the area. The Times-News editorial below states property values have increase to $83 million and the August 18 Times-News article below states two different property values ($60 million to over $80 million) and also two different property tax numbers ($1.16 million and $650,000).

Linking the MeadowView Hotel and the Convention Center with other building investments in the MeadowView area is wrong.  It is more of a case that the land was available to build on and developers took advantage of that.

When I visit my doctor in the Meadowview area, I do not stay at the MeadowView Resort and Convention Center at prices that start at $159.00 per night.  In addition, if I wanted to go to Eastman Credit Union, get my hearing checked, get a cup of coffee, get my teeth worked on, have plastic surgery, go to the Social Security office, etc., I don’t have a need for the MeadowView Resort and Convention Center.

It is apparent that the city leaders are attempting to ride on the coattails of the surrounding businesses to justify the MeadowView Convention Center Expansion.

I am sure that the surrounding businesses do not need to ride on the coattails of MeadowView Resort and Convention Center.  They would do just fine if there were no MeadowView Resort and Convention Center.

Meadowview Conference Center does not make money and the taxpayers are the ones that are keeping it afloat. $1.3 million is what is needed each year from the taxpayers to keep it operational and it is very clear that the City of Kingsport is not capable of managing the convention center to make a profit. It would be in the best interest of the taxpayers to give the convention center to private enterprise or to tear it down.

The city plans to expand the convention center at a cost of around $15 million, which would make the taxpayers investment in Meadowview about $41 million   This $41 million includes the golf course, current convention center and the new expanded convention center.

Kingsport Times-News Editorial – August 17, 2009

Three years before MeadowView opened its doors in 1996, appraised property values in the MeadowView Gateway area were $2.7 million. By last year, property values had increased more than thirty-fold to $83 million.

Renovated, expanded MeadowView Marriott marks grand opening – August 18, 2009

it has generated more than $60 million in new private-sector investments in that portion of town. Those investments in turn have generated more than $1.16 million in new property taxes each year.

….This is truly a partnership,” said Mayor Dennis Phillips. “It’s a win-win for the city.”

He said before MeadowView was built, the property was assessed at $2.5 million. Today, the value has jumped to more than $80 million.

“That’s an additional $650,000 a year to city coffers,” Phillips said. “This community owes you (MeadowView) a great debt of gratitude.”

See the following link for more information on MeadowView

The City of Kingsport, Tennessee voted to give the owner of the Fort Henry mall up to five million dollars in tax breaks.  Aldermen Marsh and Shull voted against giving a tax break to Somera Capital Management, and Vice Mayor Mallicote, Aldermen Munsey, Joh, Shupe as usual voted with Mayor Phillips to give away the taxpayers money.  Aldermen Shull made the point that the city is showing preferential treatment to the mall owner and was not fair to the current business owners in Kingsport who will be competing with the mall.

Aldermen Joh made a statement that this mall project was needed and that she was a big shopper and she did more shopping than the entire BMA put together.  Aldermen Joh, it’s nice that you have the money to shop, but there are many in Kingsport that are not in the same financial situation as you.

This Board of Mayor and Aldermen will go down in history as the Big Spenders of taxpayers money, at a time when unemployment in Kingsport is very high, high cost of gas and food, foreclosures, higher water and sewer rates and higher cost of city services.

Alderman Joh stated that you need to give tax breaks to get companies to come to Kingsport.  It make me wonder what is wrong with Kingsport in that you have to offer a tax break (bribe) to get them to relocate here.  Somera Capital purchased the mall outright, and I am sure that they had plans on what they wanted to do with the mall at that time.  Later, they approached the city of Kingsport to see what they could get in tax breaks.  My point is that the planned renovations would have happened with or without the tax break.

Somera Capital Management with it’s vast portfolio of properties is managed by General Growth Properties. General Growth Properties manages over 200 regional shopping malls.

Mayor Phillips should publish his email address so General Growth Properties can thank him for the gift of taxpayers money or to request more money.  A little birdie told me that they would like his email address.

See the following posts on this subject

Mall operator seeks city’s help for renovation project

Town Center owners outline plans for mall

Government Should Do Less to Make Tennessee More Business-Friendly

The Eastman press release below states that Eastman has had a great 2008 first quarter for earnings.  This is great for Eastman, but no credit is given for the corporate welfare that they will be receiving from the City of Kingsport, Tennessee. See link Kingsport BMA approves tax break for Eastman.

Kingsport is fortunate to have a company such as Eastman in the Kingsport area.  The size of Eastman in the Kingsport area causes a major problem when the chemical company has a bad year and lays off workers.   Quite simply, Kingsport needs to work to get manufacturing firms that can offer good paying jobs to locate in the area.  It appears that Kingsport is pushing more retail stores in the city, but this policy will not help retail stores if the citizens do not have money to spend.  Build a good base of different companies (non retail and Eastman) and the area will begin to prosper.  Kingsport might even keep citizens from leaving the area to look for jobs.

Kingsport may not be able to lure new companies to locate here without the help of the county and State.  A Metropolitan form of government could add some clout in dealing with the state for assistance.   Recently, Chattanooga, Tennessee  lost to Mississippi to build a new $800 million plant.  The State of Tennessee was very much involved  in the negations.  In Lenoir, North Carolina, Google will be building a $600 million data farm that will provide 210 good paying jobs.  Wages at the Google Caldwell County facility will vary by job function, but the average wage is expected to be more than $48,300 not including benefits, which is substantially more than the county average of $27,300 without benefits.  Lenoir, NC had been hard hit by furniture plant closures due to furniture made overseas.  Retail, now is coming back to Lenoir.

The approach above in my opinion would be better alternative to increase revenue as compared to revenue through annexations.  If Kingsport is successful in getting new companies to locate here, then maybe then they can order a dome to sit on top of the Empire of Kingsport City Hall building.

Eastman Announces Higher First-Quarter 2008 Earnings Expectation

KINGSPORT, Tenn.–(BUSINESS WIRE)–Eastman Chemical Company (NYSE:EMN) today announced that first-quarter 2008 earnings per share excluding gains and costs related to strategic decisions and actions are expected to be above the high end of the current range of analyst estimates on First Call which is $1.30 per share. This solid performance was primarily due to continued strong sales volume and higher selling prices offsetting higher raw material and energy costs.

Eastman will announce first-quarter 2008 sales and earnings on April 24, 2008, at approximately 5:00 p.m. Eastern Time. The company will host a conference call with industry analysts on April 25 at 8:00 a.m. Eastern Time. To listen to the live webcast of the conference call, go to www.investors.eastman.com, Presentations. To listen via telephone, the dial-in number is 913-312-0865, passcode number 6775748. A web replay will be available at www.investors.eastman.com, Presentations. A telephone replay will be available continuously from 11:00 a.m. Eastern Time, April 25, to 12:00 a.m. Eastern Time, May 2, 2008, at 888-203-1112, passcode number 6775748.

Eastman manufactures and markets chemicals, fibers and plastics worldwide. It provides key differentiated coatings, adhesives and specialty plastics products; is a major supplier of cellulose acetate fibers; and produces PET polymers for packaging. As a Responsible Care® company, Eastman is committed to achieving the highest standards of health, safety, environmental and security performance. Founded in 1920 and headquartered in Kingsport, Tenn., Eastman is a FORTUNE 500 company with 2007 sales of $6.8 billion and approximately 10,500 employees. For more information about Eastman and its products, visit www.eastman.com.

Forward-Looking Statements: The statements in this news release concerning expected first-quarter 2008 sales volume, selling prices, raw material and energy costs, and earnings per share excluding certain gains and costs are forward-looking. Such statements are based upon preliminary information and management assumptions and expectations and are subject to risks and uncertainties inherent in projecting results. Important factors that could cause actual results to differ materially from the expectations expressed in the forward-looking statements, in addition to those identified with such forward-looking statements, are detailed in the company’s reports filed with the Securities and Exchange Commission, including the Form 10-K for 2007 and the Form 10-Q to be filed for the quarter ended March 31, 2008

The comments below in a Kingsport Times-News letter to the editor by Gerald Cardwell concerning Kingsport, Tennessee proverbial dangling carrot is very interesting.

In response to Jessie W. Moore’s letter, we would not be in discussion with the City of Kingsport about the Engineers Building if we had not first been approached by the city manager. This meeting occurred during the time we were working out the agreement to sell our post home to the city schools, so it was like the proverbial dangling carrot. We didn’t even know the Engineers Building was going to be available, and even if we had, we knew it would be too expensive for us. The city led us to believe that we would be able to purchase the building at less than the amount we were considering paying for some property we were looking at, so we essentially stopped looking at properties.

That amount was reflected in the sales agreement Mr. Campbell and I worked out, but it never came to a vote before the BMA. The American Legion is not asking the city and its taxpayers for favors, but just to follow through on a perceived promise. And, if the city does not want to follow through, it should just tell us and we’ll move on, no hard feelings toward anyone. This thing has dragged on long enough, and it has been difficult to get a definitive answer.

Gerald Cardwell
Church Hill

The owners of Town Center mall still plan on asking for assistance for updating the old Fort Henry Mall.  If one reads the newspaper article Town Center owners outline plans for mall, it gives the impression that incentives are the norm and given nationwide.  It appears that Jeff Fleming (Assistant City Manager) is trying to justify the incentive package for a property that is not in a blighted area.

Somera Capital Management of Santa Barbara, CA purchased the property for $52.65 million and plans to spend $45 million to upgrade the mall.  The mall property is appraised at $28,401.00 per Sullivan County tax records.  Jeff Fleming stated, “It’s like a home built in 1975, and they’re updating it to 2008 standards.  If this be the case then why is the city considering incentives when I am sure that there are many local business owners, that would like to update their old property to today standards.

It appears that Kingsport is quick to consider incentives, whereas Bristol has only used TIF incentives two times

When the Fort Henry Mall was for sale, the Empire of Kingsport should have purchased it.  All of Kingsport offices could have been under one roof at the mall.  The police department is out of room and needs to expand and the higher education center would not be needed to be built.   Instead of the Empire of Kingsport owning a good portion of downtown, it could be then used by private enterprise firms.

Quite simply, Kingsport needs to get to the root of the problem why firms need incentives to do business in Kingsport.  Could it be high tax rates?

See my earlier posts

Mall operator seeks city’s help for renovation project

Tennessee Property Tax Rates

The Tennessee Center for Policy Research did a study for Tennessee’s fifty largest communities and ranked those communities into five different areas.  Listed below in the graph, is the ranking for Kingsport, Bristol and Johnson City.  One can see that Kingsport and Bristol did not rank as well as Johnson City.  It is not a good story to be told for Sullivan County.

Tennessee has long been known as a business-friendly state. Thanks to the lack of a personal income tax, the state’s comparatively low business tax rates and the natural advantages of Tennessee’s good location, the overall statewide business climate is hospitable for businesses of almost any size or type. While most of the state enjoys the benefits of a strong economy, some cities within Tennessee outperform the others in attracting new businesses and helping existing businesses prosper.

Once a business decides to relocate to Tennessee, or an entrepreneur begins a business in the Volunteer State, several questions arise: Where in the state should that business call home?  Where can business owners find the most reasonable business tax rates? What city has the fastest business growth? Who has the lowest business property taxes? Which community is most alluring for businesses, employees and consumers?

In the graph below, the ranking is for fifty communities.  The higher the number below is not good.

The recent newspaper article, Mall operator seeks city’s help for renovation project needs to looked at very carefully by the City of Kingsport.  It is only natural that the owner of the Fort Henry mall, ask for help for the planned renovation and expansion project.  It is no secret that Kingsport has given incentives to others and I am sure that Somera Capital Management wants to get to get their share also.

It is my feeling that Kingsport needs to take a hard look at this request for help.  First of all, I am sure that when they purchased the property, they did not consider how much help they could get from the city.

This development may happen whether or not Kingsport decides to help.  I do not see any advantage for Kingsport to aid Somera Capital Management with their vast portfolio of properties that they own. See their website for their list of properties that they own. Somera Capital Management

Kingsport needs to have a policy as to whom/when incentives are given.  Take the case of Food City, incentives were given for a new store.  The only thing I can think of is it may have given more jobs to people, taken business away from other stores, and may have generated a slight increase in sales tax dollars.  People can only eat so much and I don’t see a real good benefit to the city by giving this Food City store incentives.

Kingsport needs to spend more time finding companies that can locate here, that can create good paying jobs.  What the use in having more retail stores if the general population can’t afford to go to them.