As is the case with most major economic development projects, the state of Mississippi offered a bucketful of tax incentives in its efforts to lure Nissan to Canton.
The pitch paid off, and Nissan has been making cars, vans, trucks and SUVs at its massive complex off Interstate 55 since 2003.
Running the numbers
The tax incentives did not come without a couple of strings attached, though. Nissan had to have a minimum of 3,000 employees on the payroll December 31, 2005, and the same date in 2006.
According to a report released June 10 by State Auditor Stacey Pickering, Nissan did just that. The final tally: Nissan employed 4,222 people on the 2005 deadline, and 4,085 December 31, 2006.
The Performance Audit Division of the State Auditor’s Office conducted the check using records Nissan provided to the Mississippi State Tax Commission. The Tax Commission removes all personal employee information before forwarding the records to the Mississippi Development Authority (MDA). The MDA then forwarded the records to the State Auditor’s Office. Audit officials randomly select a 5% test sample of employees to verify that they were employed on December 31 in 2005 and 2006. If one employee in the sample was not employed on either of those dates, the test sample expands to 10%.
The June 10 report said the expansion of the sample this time around was unnecessary because all employees in the in the original sample were employed on the required dates.
The Performance Audit Division also used the same procedure with employees whose companies contract with Nissan and found no discrepancies. Auditing of the Nissan contractors was done because the definition “employee” under the Mississippi Advantage Jobs Act includes leased employees and because those employers can also qualify for tax incentives based on their number of employees.
Several Nissan contractors have their employment records out of state and were unavailable for audit. Lisa Shoemaker, director of communications at the Office of the State Auditor, said her office and the MDA are currently working on a method that would allow the two to audit records of out-of-state companies.
“Flying around to several different states to check these records would not be a good use of funds,” Shoemaker said. “We’re working on a way that we can have access (to employment records) during the time we’re doing our bond monitoring. They wouldn’t have to move their records here permanently.”
The employee requirements were not written into the tax incentive legislation passed before Nissan’s arrival. Rather, they were written into a memorandum of understanding (MOU) between the state and the auto manufacturer. To continue to qualify for state tax incentives, Nissan must employ a minimum of 3,000 workers until 2021.
MDA executive director Gray Swoope said writing requirements into a MOU instead of legislation makes life easier for the company and the agencies responsible for monitoring it.
“We want to be flexible enough to where we can create jobs,” Swoope said. “Overall it was a very positive report for Nissan.”
Handing out tax incentives has become a necessity in luring large economic development projects like Nissan and the Toyota plant in Blue Springs. Without them, states have almost zero chance of being selected as the site for a big project. The amount state coffers go without because of corporate tax breaks, the reasoning goes, is more than made up by the overall financial impact a large company and its suppliers have in its surrounding area — owing largely to job creation. And the battle between states to land a Nissan or Toyota perpetuates the tax-break culture, Swoope said.
“It’s a very competitive process,” Swoope said. “We have a motto here that goes, ‘Incentives will never make a bad deal good. They will make a good deal better.’ That’s the premise we operate under.”
Contact MBJ staff writer Clay Chandler at clay.chandler@ msbusiness.com .