Northern Kentucky communities face a $3 million tax gap when Toyota relocates its North American manufacturing headquarters and 1,600 workers by 2017.
City will lose 10 percent of its tax revenue.
ERLANGER, Ky. -- Northern Kentucky faces a $3 million nosedive in tax revenue as a result of Toyota's decision to relocate its North American manufacturing headquarters and 1,600 workers from its 44-acre campus that carries an Erlanger address and spreads into Boone County.
Highly compensated Toyota executives pump $2.5 million in payroll taxes into Boone and Kenton Counties, according to Northern Kentucky Tri-ED, and at least $455,000 in property taxes, according to an analysis by WCPO Data Specialist Mark Nichols.
That's not counting sales tax and personal property taxes that individuals added to the economy.
By all accounts, state and regional leaders – from the governor's office to Erlanger's city hall – were blind-sided Monday morning when Toyota officials met with Gov. Steve Beshear to break the news.
Now they're scrambling to come up with plans to retain as many of highly-skilled employees as possible and covering the economic gap.
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Mike Goss, general manager of external affairs at Toyota's manufacturing headquarters in Erlanger, presented $560,000 to NKU for pre-college teacher training in science, technology, engineering and mathematics. | Bob Driehaus, WCPO
Highly compensated Toyota executives pump $2.5 million in payroll taxes into Boone and Kenton counties, according to Northern Kentucky Tri-ED, and at least $455,000 in property taxes, according to an analysis by WCPO Data Specialist Mark Nichols.
That's not counting sales tax and personal property taxes that individuals add to the economy.
By all accounts, state and regional leaders – from the governor's office to Erlanger's city hall – were blind-sided Monday morning when Toyota officials met with Gov. Steve Beshear to break the news. Toyota chose to move the 1,550 employees to three other locations – 1,000 to Plano, Texas, 300 engineers to Georgetown, Ky., and 250 to offices near Ann Arbor, Mich. – without offering the state the chance to make a counter-offer to keep the headquarters here.
The new Plano headquarters, which will be built from scratch, will also absorb 2,000 workers from Toyota Motor Sales in Torrance, Calif., as well as a small number of workers in New York in the company’s move to consolidate.
"The decision was fait accompli," said Dan Tobergte, president and CEO of Northern Kentucky Tri-ED, which coordinates recruiting and retaining businesses in Boone, Campbell and Kenton counties.
The company decided to leave the Erlanger and Torrence headquarters out of contention for the combined headquarters in order to more easily merge the two offices and their differing cultures into one unified location, he said.
Most workers destined for Plano will not move until construction of Toyota’s new headquarters is completed in late 2016 or early 2017, the company said.
While Toyota's Dear John letter to the state emphasized the manufacturer's continuing employment of 8,200 workers in Georgetown, the moves leave Northern Kentucky leaders scrambling to fill the void left by one of its signature employers.
"We're still sorting though the information that's being released today," Boone County Judge-Executive Gary Moore said. "Right now my thoughts and prayers go out to each of the employees that will have to make the decision whether to move with the company or find jobs here in Northern Kentucky."
Tobergte said he will work to persuade Toyota employees to stay in the region.
"There's going to be a good number of them who want to move, but we'll certainly try to attract and retain as many as we can," he said.
Asked if the region will be racing to find employers for the workers that will have options elsewhere, Tobergte said, "Possibly, yes. Texas is almost a two-day drive from here. It's a big move for someone who has settled here."
He said only 15 percent of the Erlanger headquarters' staff comprised Japanese nationals, who are likely to move with Toyota, leaving 85 percent Americans who may be less inclined to pull up stakes.
"The good news is we have plenty of time to get cushioned for the loss," Tobergte said.
Moore said the sudden glut of skilled workers and executives would be a strength.
"We regularly meet with automotive industry companies that are looking at our area. This could very much be a positive when they're considering coming here," he said.
Joe Hall, a spokesman for the Kentucky Cabinet for Economic Development Cabinet, said the state will work closely with Northern Kentucky leaders and tout the wealth of talent available to prospective employers.
"When we work with businesses looking to relocate, a qualified workforce is usually the No. 1 thing that they're looking for," he said. "The fact that we definitely have that bodes well for us."
Hall didn't pretend the news was good in the short term.
"We found out about this (Monday) morning just like everybody else. We're shocked and we're disappointed that it's going to impact so many people," he said.
Tobergte said Toyota officials offered assurances that they would work with Northern Kentucky leaders to find a buyer for its 44-acre campus, which includes the headquarters building and a warranty operations building.
It's a tall order.
“Those are very difficult jobs to replace in the white-collar economy,” said Doug Moormann, vice president of Government Strategies Group, a downtown-based lobbying and consulting firm.
Moormann, former vice president of economic development for the Cincinnati USA Regional Chamber, said the Toyota relocation is certain to cause collateral damage.
“Even if we land another project or even a series of projects that add up to 1600 jobs it’s unlikely they’ll end up at the same pay level,” he said. “So, that’s just money that’s
just going to flow out of the local economy. That connects to house sales. It connects to retail sales. It’s just a lot of money that’s going to be drained from the local economy.”
Boone and Kenton counties are in the fortunate position of having the lowest unemployment rates in Kentucky – 6.3 percent in Boone and 6.4 percent in Kenton, according to the state.
"This is the exact reason that we need to have a strong offense," Moore said, pointing out that Boone County has added 9,000 jobs since the low-point of the recession in January 2008.
The region was excluded from whatever wheeling and dealing may have occurred with Toyota in the deal to relocate to Texas. That was done privately and quietly, an absolute must for those economic development agencies hoping to gain the trust of a company like Toyota. In that vein, Tobergte demurred when asked if Tri-ED had any prospects in line to help fill the void left by Toyota.
"You know I can't comment on that, but we have a strong pipeline right now. We're going to capitalize on our assets," he said.
Dan Monk contributed to this story.