JOHNSON CITY, Tenn. (WJHL) – Mullican Flooring, a Johnson City-based company, recently agreed to repay incentives it received from the city and county of Washington, Tennessee in 2017.
Johnson City and Washington County each agreed to pay $600,000 in incentives to help the company build a new warehouse to maintain operations in the city.
The agreement is one of many concluded by the Northeast Tennessee Regional Economic PartnershipPILOT program of . PILOT, or payment in lieu of taxes, is an incentive program that encourages businesses to locate and grow in the region.
“Incentives are the most successful solution, and if a community doesn’t offer an incentive – whether it’s a PILOT or a cash grant, whatever it is – you’re not in the game,” vice president of the Northeast Tennessee Regional Economic Partnership (NETREP). said President Alicia Summers.
The process for obtaining PILOT incentives prior to 2014 was quite streamlined and remains so for many communities. A request would be sent directly to a city or county commission and either approved or denied. If approved, the incentive would be granted to the company with very few stipulations.
However, that all changed in Johnson City and Washington County with the Capital Investment Program, which sets requirements or criteria that businesses must meet to receive the money.
“If there’s no accountability, you could lose jobs — jobs could never be created,” Summers said. “You know, if there’s an average wage component, you’re not doing anything to increase that median household income.”
“Businesses could close indoors – for the duration, perhaps, of PILOT and there will be no return on investment from this incentive,” she said. “So it made sense to have that performance metric and accountability in there.”
Ken Huffine, Washington County Commissioner and member of the Commerce, Industry and Agriculture Committee, explained the importance of this extra layer of financial protection.
“Citizens can be assured that the investments we make – we get the return on those investments, which will ultimately lead to successful growth and a very bright future for our community,” he said.
In recent weeks, Mullican Flooring has filed for termination of its $1.2 million PILOT deal after failing to meet the agreed-upon minimum hiring threshold.
In a statement sent to News Channel 11 on Wednesday, the company said, among other things:
Mullican Flooring, like every other manufacturer in the United States, works hard to meet the challenges of a rapidly changing job market. Given these market conditions, we asked Johnson City and Washington County to disband the PILOT program, which was developed in very different work and economic climates.
While other companies tried to avoid repaying the incentives after failing, Mullican Flooring took the initiative, approaching both the city and the county to return some of the incentive funds.
“I think that says as much in terms of a relationship as a company can say ‘hey, we’re not operating the way we thought we were,'” Johnson City City Manager Cathy Ball said. “‘And we know we’re held accountable and we want to come to you and reset.'”
“We actually recruit good business partners from our community, and when someone comes forward to demonstrate that they really are that strong business partner, it’s extremely refreshing,” Huffine said.
“Being able to succeed and fail and then learn from that and adjust the model says a lot about business because we’ve been in a changing world for a few years,” Ball said.
“No one can really have the clearest crystal ball and figure out what the economy is going to do,” Huffine said. “We have to be able to make adjustments. I think that’s the definition of a true partnership; when we encounter difficulties, we overcome them so that we can maintain an ongoing relationship, which would be a fruitful relationship, for us and the community.
Mullican Flooring’s statement went on to say that the challenges they have faced in meeting the agreement have not impacted their operations or their “long-term commitment to this region”.
“We enjoy strong demand for our products and look forward to continued future growth as we work together with city and county leaders to benefit Northeast Tennessee,” the company concluded.