Bruce Hutchinson

Local businesses, on average, generate about 2 percent more in taxes for Hamilton County than out-of-town contractors hired to do the same work, according to an economic study released Friday.

Dr. Bruce Hutchinson said his review of local government contracts showed that, for every $1 million in contracts awarded, Hamilton County nets about $23,000 more in taxes when the work is done by local firms and workers compared to out-of-town contractors.

"Not all contracts are the same, but as a general rule of thumb, the local government will be advantaged roughly 2 percent of the value of the contract if a local firm is used," said Dr. Hutchinson, a professor of economics at the University of Tennessee at Chattanooga.

Local companies pay more local taxes directly and tend to employ a larger share of local workers, Dr. Hutchinson said. Local workers, in turn, spend more money in the local area and generate more tax revenue than those employed by out-of-town contractors, he said.

HireHere, a coalition of local businesses, unions and volunteers who support hiring Chattanooga workers and companies, paid for the UTC study.

At a news conference Friday, Dr. Hutchinson and some elected officials said the study underscores the advantages of buying and contracting locally. If a local bid is less than 2 percent higher than an out-of-town contractor's bid, "the local government benefits by letting the contract to a local business," he said.

But officials at the news conference backed away from endorsing a proposed city ordinance to grant a local preference in awarding contracts. City officials have asked the state attorney general for a legal opinion on the proposed ordinance.

"The point here is that when you start looking at relatively equal scenarios between two companies, there is an advantage if we hire locally for local dollars spent and government revenues collected," state Sen. Andy Berke, D-Chattanooga, said during the news conference.

Sen. Berke and City Councilman Andraé McGary said they aren't necessarily pushing for specific local content rules.

"This study certainly indicates that it is our best interest to at least look into this issue," Mr. McGary said.

Dr. Hutchinson said his study did not consider any specific legal requirements for a local preference, or the potential that other communities might try to restrict Chattanooga companies from selling goods in their cities.

Roger Tuder, executive director of the Associated General Contractors of East Tennessee, said his group opposes a city preference ordinance because it is unnecessary and could trigger limits on local contractors doing business elsewhere.

"If Chattanooga gives a preference to its city contractors, what's to prevent Cleveland or Marion County or even East Ridge and Red Bank from adopting similar ordinances that might disadvantage Chattanooga companies?" he asked.