Plano is putting a lot of money down to take Toyota home

By WENDY HUNDLEY AND TERRY BOX

Staff Writers The Dallas Morning News

Published: 10 May 2014 11:32 PM

When Plano rolls out the welcome mat to Toyota this week, officials will be offering the automaker the largest economic incentive package in the city’s history.

The deal includes a $6.75 million grant that’s linked to developing a 1 million-square-foot corporate campus, transferring or creating up to 3,650 jobs, and making use of Plano hotels during the relocation period.

The Plano City Council will vote Monday on the package that also includes creation of a 100-acre reinvestment zone on the northwest corner of Legacy and Headquarters drives, and a 10-year, 50 percent abatement on real and business personal property taxes.

Many experts say deals like this are common, but some are beginning to question whether cities are getting their money’s worth.

In the past, Plano has attracted other major companies such as J.C. Penney, FedEx and Pizza Hut with lucrative offers, but no deal comes close to the proposed package for Toyota.

While the city’s offer is generous, “I don’t look at it through a prism of what the incentives represent,” said Sally Bane, Plano’s executive director of economic development. “I look at it as an amazing opportunity for this community.”

Others agree that Toyota’s consolidation of three divisions in Plano is a move that will reverberate throughout the area.

“Plano, as a site for doing business, has captured national attention,” said Terry Clower, director of the Center for Economic Development and Research at the University of North Texas. “That matters in your ability to attract other firms.”

Clower said economic development offers are difficult to draft because cities don’t know what other deals are on the table. “You have to offer these things, and you don’t know if Toyota would have come in any case,” he said.

N. Texas competition

Experts say that Plano’s economic incentive package is not unusual among North Texas cities, which often compete to attract companies.

“That’s fairly typical of what a lot of cities offer — even for much smaller deals,” said Jim Gandy, who heads the Frisco Economic Development Corp.

Toyota’s property tax break is less than what the city of Irving offered to lure 7-Eleven’s corporate headquarters from Dallas.

Irving is giving the developer of 7-Eleven’s headquarters a more than 80 percent property tax break for 13 years. The 7-Eleven offices will house about 1,250 workers.

Irving is also providing sales tax incentives to the company.

Ten-year, 50 percent property tax abatements, like the one offered to Toyota, are fairly common.

Plano’s total assessed property values are projected to be $28.8 billion for the 2014-15 fiscal year, according to the city’s three-year financial forecast.

“Plano probably won’t miss the revenue,” said Bernard Weinstein, adjunct professor at SMU’s Cox School of Business. “It’s really not that much for the return to the state and the city.”

And Toyota’s move could attract other employers.

“This is a really big deal in terms of jobs, prestige and what may follow — suppliers and vendors,” Weinstein said.

Still, he wonders if such largesse is really necessary.

“Should taxpayers be giving tax breaks to the most profitable and the largest car manufacturer in the world?” Weinstein said. “That’s icing on the cake.”

Clower said an economic development incentive grant of almost $7 million is “impressive but it’s not out of line with the number of jobs that will be created.”

Other auto moves

In addition to Plano’s incentive package, the state will kick in $40 million from the Texas Enterprise Fund. On the whole, that appears modest in comparison with what others have offered for similar auto-industry moves in the past.

In 2006, when Nissan decided to relocate its headquarters from Gardena, Calif., to Franklin, Tenn., the state provided a $197 million relocation assistance package.

Nissan moved 1,300 jobs to Franklin.

In addition to the relocation assistance, the city of Franklin spent $15 million to purchase a 50-acre parcel for Nissan’s headquarters and then leased it to the automaker.

Also, Nissan got a $5,000-a-year tax credit for 20 years for each new job created by the relocation.

Clint Brewer, a spokesman for Tennessee’s Economic and Community Development Department, said the state had not attempted to determine the overall economic impact of the move.

“We don't do economic impact studies on projects as long as they create the jobs they are supposed to and make the capital investments promised,” Brewer said. “And Nissan has always met its commitment.”

In 2011, local, state and federal governments gave Volkswagen $577 million in incentives to build a $1 billion assembly plant in Chattanooga, Tenn.

The plant employs 2,000 people.

Moreover, when Toyota selected San Antonio as the site for a new full-size pickup truck plant in 2006, the state provided $133 million in incentives.

The package included $27 million to train the plant’s 2,000 full-time workers, $47 million in waived fees and phased-in taxes, and $14 million for land.

Local officials also offered Toyota $34 million in school- and hospital-district tax abatements, but the automaker declined to take them, saying it wanted to contribute to the local economy.

Gov. Rick Perry maintained that the incentives given to the truck plant will yield an 18.3 percent return over 10 years.

Toyota expected the new truck plant to build 150,000 full-size Tundra pickups a year — a goal yet to be met.

The company sold 112,732 Tundras last year.

It has added production of Tacoma midsize pickups to San Antonio to keep the plant operating at full capacity, and last year said it is considering expanding the plant.

Staff writers Steve Brown and Matthew Watkins contributed to this report.

AT A GLANCE: Other incentive plans

The Plano City Council is scheduled to vote on a Toyota economic incentive package that’s the largest in the city’s history.

Here are some other cash incentives approved in recent years by the Plano City Council to attract, expand or relocate businesses to the city:

February 2014 — FedEx Office and Print Services receives $1.6 million to relocate from Dallas

July 2012 — Plano provides $4 million to Tollway 121 to build a new $53 million hotel

March 2012 — Ericsson receives $1.9 million to expand and retain 500 employees

November 2010 — Encana Oil and Gas receives $2.4 million to relocate to Plano from Denver

November 2009 — Pizza Hut receives $2.1 million to relocate from Addison

SOURCES: Dallas Morning News research, Plano City Council documents