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Dell heading to court over Tennessee factory?

Lebanon considers claw-back

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Residents of Lebanon, Tennessee are apparently none too happy with PC and server maker Dell.

According to the Austin American-Statesman, legal action may be imminent.

The paper quotes city council member William Farmer, who says the city of Lebanon and the surrounding Wilson County are mulling over a lawsuit against Dell, which inked a tax break deal in 2000 with the local governments to put one of its factories there in exchange for bringing 1,000 jobs to the plant.

Cities and counties are always excited about a big company coming to town because of the jobs that get created, but when the economy goes bad, the tax breaks they have given to that big company are long since gone, and when the layoffs start, the mayors and managers of those cities and counties face some pretty tough voters.

Dell, like other IT suppliers, has been cutting jobs during the recession, culling 11,600 workers from its payroll in the 12 months ending in October 2008 and slicing another 2,510 jobs at its Limerick, Ireland factory earlier this year.

The city and county reckon Dell got $800,000 worth of city property tax breaks and somewhere between $5m and $6m in combined tax breaks for both the city and county over the past nine years, but the problem is that the plant only has around 500 employees. The exact number of job cuts that have hit Lebanon have not been detailed by Dell yet. The company is expected to tell the Wilson County Industrial Board in the next few weeks how many people are still working at the local Dell plant, a report Dell apparently does every year, according to the American-Statesman report.

This is probably a bit of a flashback for Dell, which found itself in court back in early 2005 over a $280m incentive package that state and local governments in Winston-Salem, North Carolina, were willing to shell out to lure 1,700 Dell jobs to the state. In this case, the suit was meant to stop the deal. Various groups suing Dell argued that such tax incentive deals were in violation of the US Constitution and unfair to local businesses that didn't get such breaks.

Dell won the first round of a legal battle in May 2006 to push ahead with the incentive package, but the North Carolina Court of Appeals ruled in April 2007 to reinstate the lawsuit against Dell.

The company prevailed and built the factory in Winston-Salem, but that factory has been subject to layoffs, just as the Dell factories in Texas, Tennessee, and Limerick have been. ®

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