Republican Gov. Bill Haslam is pictured in this file photo. (Photo by Wade Payne, Special to the News Sentinel)

Tennessee Gov. Bill Haslam said Friday he wants to increase state grants to lure businesses like Audi to the Volunteer State.

Although Haslam said he wants to focus more attention on aiding the growth of small businesses, the governor insisted he is prepared to offer incentives - and wants to boost upfront cash incentives - to lure industrial prospects such as Audi, a division of Volkswagen. He also wants to ensure that details about such prospects remain outside the state's open records law.

"We've had a lot of discussions with Audi as well as others," Haslam told reporters and editors at the Chattanooga Times Free Press. "We would obviously love to have Audi come here."

Talks also are ongoing to put together an incentives package for Nissan regarding the expansion of its Decherd, Tenn., engine plant, he revealed.

If the governor's proposed legislative package of 55 bills passes, the German and Japanese automakers could receive both state grants and protection for business secrets revealed during negotiations.

House Majority Leader Gerald McCormick, R-Chattanooga, said the privacy allowances won't make deals less transparent and won't apply to existing records.

"It's to increase [companies'] confidence in sharing information with us," he said.

But critics complain the legislation undermines public confidence in the process.

"Our politicians should not consider themselves the gatekeepers for the private economy," said Ben Cunningham, a tea party activist and spokesman for Tennessee Tax Revolt. "It's a slap in the face to the whole idea of open government."

Haslam said cash grants under the state's Fast Track business development program must go through the State Funding Board and must be budgeted in an open process.

"If there are things that are part of the companies' proprietary business operations, that shouldn't be open for review because we do think that opening those records would have a chilling effect on companies that want to apply with us," Haslam said.

Incentives Increase

The broader thrust of the plan, Haslam said, is a push to give negotiators increased flexibility in what activities they can fund.

State grants previously could only go toward infrastructure and training. If lawmakers embrace his plan, state money could also pay for some site work and relocation expenses.

But those extra qualifiers only apply under special circumstances, primarily if an employer is looking to create a large number of jobs in a small community, he said.

"This is targeted at unemployment in rural areas," Haslam said.

The proposal will de-emphasize tax credits and boost the state's ability to give grants on the front end, which he said have proven more popular among businesses looking to build on Tennessee's ample acreage.

"The issue around tax credits is that companies don't value them as much and they're down the road," McCormick added.

Mike Randle, publisher of Southern Business & Development magazine, said industrial prospects often value immediate cash incentives more than long-term tax credits, which ultimately may not be used.

State budgets are not as flush as when Volkswagen picked Chattanooga in 2008 after state and local governments offered a record $577 million in state and local incentives, Randle said.

"It's a huge investment, but when you have an auto plant at our doorstep, states find a way to write a check because the payoff from an auto plant is just so great," he said.

Tennessee, Alabama and Georgia all appear to be in the hunt for any new Audi plant, he said. An Audi plant could complement the VW plant in Chattanooga, he said, just as Kia's plant in LaGrange, Ga., complements the Hyundai plant 80 miles away in Montgomery, Ala.

Haslam said Volkswagen's success in Chattanooga proves the value of building in Tennessee.

"There's nothing that sells like a great track record and we've seen that with the Volkswagen Passat," he said. "Look how fast that plant got built and how quickly that plant was producing a product that became car of the year [by Motor Trend magazine]."

Lawmakers haven't decided how much the state would offer over and above current levels. But the governor's proposals are going "to the top of the list" and lawmakers will have a chance to see the bills next week, McCormick said.

"We're in competition not just with other states, but also all over the world, and that playing field is always changing, so we have to tweak things to make sure we're not falling behind," he said.