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VOL. 127 | NO. 11 | Wednesday, January 18, 2012

Electrolux Touts Local Contracts

By Bill Dries

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Electrolux North America executives said Tuesday, Jan. 17, the company has awarded $6.3 million of the $15.3 million in contracts so far for construction of its new Memphis plant to local minority-owned firms.

Overall, $14.5 million of that $15.3 million total has been awarded to local companies.

The $6.3 million in minority contracts went to five companies, four of them in Shelby County and the fifth in the Memphis metropolitan statistical area.

Electrolux released the updated figures as Memphis Mayor A C Wharton Jr. and Shelby County Mayor Mark Luttrell defended the contract for Memphis city and Shelby County government incentives in the project that included no requirements that Electrolux use a certain percentage of local and local-minority businesses.

“We share in your concerns,” Luttrell said of renewed concern as the first round of contracts on the project in November included no locally owned firms. “Citizens still need jobs. Families need to put food on the table. Businesses need to keep the lights on. I am very much aware of that. What we need to keep in mind is that this project is really just beginning.”

The $15.3 million in contracts so far is part of a total $80 million construction contract.

The entire manufacturing project, which takes in more than the construction of the plant in southwest Memphis, is $266 million. Electrolux has said it will contribute more than $100 million of that in capital spending.

When Electrolux announced earlier this month it had hired W.G.Yates & Sons Construction Co. as general contractor for the project, it also pledged that half of the $80 million construction contract would be spent with Memphis-area businesses. W.G.Yates has a Memphis office but is based in Philadelphia, Miss.

“Given where we are today and given what we know today … I have every confidence that this will be a winning investment for all of the people of Memphis and Shelby County,” Wharton said. “There is an unswerving commitment to see this process all the way through. This is just the beginning.”

Wharton stressed that the city is not seeking to reopen the contract agreement.

“I think what we need to do now is forget about language and look at performance,” Wharton said.

The contract involved more than $90 million in state government funding – the largest amount of state incentives for any Memphis industrial project. And Wharton said the state was a factor in the contract negotiations that did involve some talk of putting in a specific percentage.

“Once we (the city) saw that in terms of just putting contract terms in … that the state was not insisting on that, we had to make a judgment call at that point,” he said. “We made the judgment call that we would accept Electrolux on the commitment it made, which it made over and over again. … It was discussed from the very beginning.”

Meanwhile, Electrolux Project Director Jacob Burroughs stood with Wharton and Luttrell at the press conference and met individually Tuesday with Memphis City Council members. The council’s renewed concerns about the level of local and local minority-owned firms participating in construction were instrumental in making the deal an issue again.

But council members have differed on what the city could have done differently.

“We didn’t have any leverage,” council member Kemp Conrad said at a Tuesday committee session on a resolution by council member Wanda Halbert to require the administration to submit a list or summary sheet of all contracts above $250,000 on such projects to the council.

Halbert put the measure on hold as city Chief Administrative Officer George Little agreed to provide the list to the council. The agreement would be without a formal resolution that might raise questions about the power of the mayor to make and execute contracts. It is a power the mayor does not share with the council but must balance with the need for council approval of funding involved in such contracts.

Halbert also disagreed with Conrad on whether the city has leverage with private corporations.

“I’m a taxpayer. When you make a deal to give my money three different ways to somebody, then don’t tell me I don’t have leverage,” she said. “We do have some leverage.”

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