In the contest for a new Kia assembly plant, Mississippi is offering $240 million in federal tax breaks aimed at rebuilding areas ravaged by Hurricane Katrina - even though the area around the plant site suffered almost no damage.
The proposed location, Columbus, Miss., is 225 miles north of the coast. The storm destroyed 12 homes, but town officials say Columbus was otherwise unscathed.
Georgia appears to be Kia's top choice for the plant, but Mississippi's incentive package now totals nearly $1 billion, primarily from local, state and federal tax breaks.
About $240 million is due to the efforts of U.S. Sen. Trent Lott, R-Miss., who sponsored the federal tax breaks for post-hurricane reconstruction.
Mississippi's offer is more than three times the $280 million incentive package offered by Ohio to DaimlerChrysler to build the $1.2 billion Jeep plant in Toledo, Ohio. The Toledo deal prompted a protracted legal battle with taxpayer advocates. Last week, the dispute reached the U.S. Supreme Court. That case is pending.
But Mississippi's generous offer may be too late. Economic development officials in three states say Kia already has signed a tentative agreement for its favored site in West Point, Ga., asking the state to complete an incentive package within 30 days.
"We intend to make a final decision and announcement by the end of the 1st quarter" or the end of March, Kia spokesman Michael Choo said in an e-mail last week. Choo said he could not comment further.
"It's moving very fast," said one Georgia official close to the project, who asked not to be identified.
Last year, Kia told officials in several Southern states that it envisioned a plant with 1,500 workers. But in December, development officials reported that Kia had decided to build a bigger plant that would employ 2,000 to 2,500 workers.
Kia harbors ambitious plans for U.S. growth. It sold a record 275,851 vehicles in the United States in 2005, up from 270,055 in 2004. It is aiming for 500,000 sales in 2010.
Kia has made no secret of its
intentions to open a U.S. plant. The company surprised many last year when it publicly identified a site in Meridian, Miss., as its probable choice.
But concerns over Meridian's sparse population, combined with Kia's decision to build a larger plant, led the Koreans to consider other sites. So Mississippi now is promoting the greenfield site in Columbus, population 26,000. Joe Higgins Jr., CEO of the Columbus-Lowndes Development Link, the entity that is offering the Mississippi site to Kia, concedes that West Point has a larger regional population than Columbus.
But he predicts Georgia will be unable to grant Kia one of its critical site wishes: "We've been told that Kia really wants to own the real estate," Higgins says.
"It's unconstitutional for the state of Georgia to 'gift' a site to a company. It can lease it to Kia, but it can't give them the land. We think Kia will come back to Mississippi."
One reason for Mississippi's optimism: It helps to have friends in high places.
The $983.1 million incentives proposal includes a special federal tax break worth an estimated $240 million to Kia.
That tax break would come through the Gulf Opportunity Zone Act of 2005, sponsored by Lott and signed into law in December. The act gives special federal tax incentives to businesses that create jobs in the area hit by Hurricane Katrina.
The proposed Kia site in Columbus is in the northernmost county in the region covered by the act. Columbus is 225 miles from the Gulf Coast and 60 miles west of Tuscaloosa, Ala.
If Columbus wins the plant, it would be richly compensated for its hurricane-related losses. According to local officials, the Federal Emergency Management Agency paid Lowndes County residents $1.1 million for storm damage.
"Actual storm damage was not much," said Kenneth Moore, Columbus' fire chief and emergency coordinator. "Most of the expenses we incurred were (due to) evacuees coming in."
Under the congressional act, Kia could depreciate a large part of its plant investment in just one year, instead of using the standard 39-year depreciation schedule.
The proposed incentive dwarfs other Southern states' offers to automakers. It is nearly four times the $253 million aid package that raised eyebrows around the industry in 1995, when Alabama recruited Mercedes-Benz.
It's also nearly four times as large as the $250 million Alabama offered four years ago to recruit Kia's corporate parent, Hyundai Motor Co.
You may e-mail Lindsay Chappell at [email protected]