ATLANTA - million in bonds to fulfill an incentives package promised to Mercedes-Benz Corp. for selecting the state as a manufacturing site.
Under the plan, which requires lawmakers' approval, an authority would be created to issue the debt - secured by interest from the sale of gas and oil leases in 1982 - and would serve as the cornerstone of a renegotiated deal with Mercedes. The new agency, the Alabama Incentives Financing Authority, would be given one-time authority to issue up to $145 million in debt and to satisfy the state's outstanding financial obligations with the automaker, the governor said at a press conference.
The Alabama Trust Fund would be siphoned to pay the debt issued by the new authority. The fund would be allowed to use $13 million of its $60 million in annual interest earnings to retire the debt that will be sold by the new authority.
Andreas Renschler, the president of Mercedes-Benz U.S. International, praised James for fulfilling a "promise to honor our contract. This has been accomplished in the spirit of cooperation, partnership, and trust."
James said that the agreement with the automaker should quiet critics who labeled the original incentives package a poorly planned giveaway. Under James' proposal, the bonds are secured by a lien on the equipment and property to be purchased with the bond proceeds.
Under the previous contract, the state agreed as of April 1 to reimburse Mercedes for up to $42.6 million of the costs of building a manufacturing plant near Tuscaloosa. However, James' fiscal 1996 budget, which was released on April 18, included no money to meet that promise.
Under the new deal, Mercedes would have to repay the state even if the plant never opens. There was no such obligation in the prior contract, James said. The plant is scheduled to open next year and turn out its first vehicle in the fall of 1997.
The Republican governor said that the new authority will issue bonds to pay Mercedes the $42.6 million construction reimbursement, $30 million to build a Mercedes trading center, and another $60 million to train the workers.
Former Gov. Jim Folsom, who was defeated by James last November, offered the incentives package to Mercedes when the company was considering several states in the Southeast as the site for its first U.S. production plant. The plant will make a sport utility truck.
Folsom's original plan had the State Industrial Development Authority funding the state's obligation to Mercedes through tax increment bonds tied to corporate income taxes.
James said he has been trying to rework Alabama programs that provide incentives to large companies to make them more equitable from the state's point of view.
The now-suspended programs offered corporate income tax breaks that many critics labeled unfair and issued industrial development bonds to finance capital projects, according to Richard Sutton, a spokesman for the Industrial Development Authority. They also offered income tax breaks to corporations that would relocate to Alabama, invest $5 million, and create 50 jobs, said Sutton.
Income tax credits were also extended to employees of the relocating companies, Sutton said. The credits posed a legal problem because they were withheld from employees by the corporations and were given back to the state - apparently against state law - for education programs.
