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Did Jacksonville promise battery maker $7 million in cash?

The Peyton Administration celebrated a major coup several weeks ago when news broke that Saft America, a division of Johnson Controls, was looking to build a $200 million high-tech battery manufacturing facility at Cecil Field using $100 million in DOE federal stimulus grant money.  According to the Mayor’s Office, the plant could add up to 800 jobs in Jacksonville.

The plant, however, is not a guarantee.  The decision to locate in Jacksonville would be contingent upon successful negotiations with the City of Jacksonville and the State of Florida regarding the utilization of available incentive programs related to capital investment and job creation.  It also depends on the state allowing the city to use the federal stimulus grant program—provided Saft is awarded the highly competed for DOE grant funding—for the construction of the facility.  This could explain the reasons behind the Mayor’s hosting of a fundraiser for Charlie Crist, even though he has had long standing differences with the Governor over Tallahassee’s continued erosion of local government authority.

Stimulus dollars, however, aren’t the only issue Saft is seeking to overcome.  On May 13th, the Mayor’s staff personally arranged a meeting between Saft America officials and Congresswoman Corrine Brown.  The topic at hand was Saft’s concerns that PHMSA (the US Department of Transportation Pipeline and Hazardous Materials Safety Administration) was not representing their interests. The Air Line Pilot’s Association was pushing for the FAA to take over hazardous goods regulation  and Saft was concerned that it could lead to potential tightening of U.S. regulation of lithium batteries in transportation.

Regulation issues aside, The News Herald in Morgantown, North Carolina, has reported that Saft chose Jacksonville because of the city’s offer to pay $7 million in cash.  Saft already has a plant in Valdese, North Carolina and Valdese had been in talks with the company to build an additional plant.  The plant, according to Jeff Morse, the Valdese Town Manager, would have added 150 jobs to the local economy in the first three years, with the potential to add up to 700 jobs over the next 15 years.

Valdese competed rather aggressively for the new plant, even flying in North Carolina Governor Beverly Purdue to meet with company officials.  In the end, however, the company chose Jacksonville.  According to Morse, it was for one reason—cash up front.  Morse told The News Herald that “the town, county or state doesn’t offer cash to companies. If the state plunked down cash to each company it tried to recruit,” Morse went on, “it could bankrupt the state.”

While the opportunity to develop manufacturing jobs is something Jacksonville should be focused on, it is important to make sure adequate protections are in place to ensure any taxpayer dollars that are spent are not wasted.  If Jacksonville did indeed pledge $7 million in cash to secure the relocation of the Saft plant, it’s important that Duval County taxpayers understand where those dollars are coming from and how their interest would be protected if the plant—and the promised jobs—failed to materialize as promised.

After all, last Thursday, Saft’s stock dropped as much as 16% after the company announced that 2nd Quarter sales were down 10%.   The warning came on the heel of the news that the company was refinancing debt at higher spreads than on its existing debt.  Additionally, there are always the concerns that a limited supply of lithium could end the manufacturing boom before it even gets moving.

Transparency is something that has been spoken of quite a bit lately, perhaps this would be a good opportunity for the city to deliver.  Growth is good, jobs are important, but let’s make sure the taxpayers are protected in the process.

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  1. […] Posted in Uncategorized by Abel Harding on June 17, 2009 Yesterday’s story that uncovered charges from the Town Manager of Valdese, North Carolina that Jacksonville officials promised $7 million in cash incentives to Saft America […]

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