Tax Abatement Committee

TAX ABATEMENT COMMITTEE CITY HALL – ROOM 302 A 10 N. DIVISION BATTLE CREEK, MICHIGAN NOVEMBER 17, 2008 1:00 P.M. PRESENT: Mayor Behnke, Vice Mayor Walker, Comm. Baldwin, and Comm. Hersha (Arrived 1:07 P.M.) ABSENT: None. STAFF PRESENT: Susan Bedsole, Russell Claggett, Steve Hudson, James Ritsema, Ken Tsuchiyama, and Eileen Wicklund OTHERS: Karl Dehn and Doug Voshell PUBLIC COMMENT: None. CALL TO ORDER: Mayor Behnke called the meeting to order at 1:02 P.M. Ken Tsuchiyama stated the purpose of the meeting was to review the tax abatement policies. Susan Bedsole reviewed a report that was completed in December 2006 that showed 83 total certificates issued with 62 having a closing date. Only 9 companies had failed to complete their pledge. She also presented a copy of the Public Act 198 and 328 policies for the City of Battle Creek. Mayor Behnke opened the floor for discussion. Comm. Hersha stated in the 2006 report, there was an indication of economic impact modeling and asked what became of that. Karl Dehn commented that the model was never completed. Vice Mayor Walker asked what the city is using in lieu of a software product that measures return on investment. Karl Dehn responded that Battle Creek Unlimited uses a software product on a project basis; however, they do not evaluate every tax abatement request. 1 Comm. Baldwin questioned how much information the Commission would like to see in a report. She suggested having a comparison between 328 and 198 applications and how Battle Creek compares to other communities. Mayor Behnke would like to see Battle Creek as a leader in using a tool that will provide better return for our tax dollars. Karl Dehn noted one of the Battle Creek policies that is a departure from state law is a 6- year tax abatement that includes only personal property without any real property investment. Ken Tsuchiyama offered having staff put together a report of what the city requests in an application, what is required by the state, a comparison with other communities, how many jobs were created, and a monitoring tool to determine how effective these abatements are on a general basis. Comm. Hersha felt that ultimately BCU, the Commission, and city staff would need to review the information to get a sense of whether a tax abatement request makes sense. He stated the current process is very limited, and more basic information is needed to make a good decision. In addition to the application, Ken Tsuchiyama asked what other information was desired. Karl Dehn clarified that there are two areas where Battle Creek’s policy is more restrictive than the state guidelines: Battle Creek requires a minimum on the investment amount (Guideline #3), and where the abatement only applies to personal property from manufacturing equipment (Guideline #4). In the area of commercial properties, a new tool under the Obsolete Properties Rehabilitation Act has been used on the Motor Mile for redevelopment projects. Also, the 328 application can go beyond manufacturing and would be useful to define a technology tool for very specialized businesses. Vice Mayor Walker asked what other things companies look for during their location decisions. Although it is important to attract new businesses and offer abatements, the Commission needs to decide how they can still provide basic services that citizens have come to expect. Karl Dehn responded that companies will look at the education levels of a community or a matrix of strengths and weaknesses regarding the cost of doing business. Vice Mayor Walker said it is important to him to know if there are benefits that outweigh the costs of a project. Comm. Baldwin reminded the Board that Battle Creek has professionals that bring projects forward. She asked if BCU looks at what kind of income jobs will provide. 2 Karl Dehn said that is already built into the model; however, some companies may/may not be nervous about their competitors understanding their personnel costs. Comm. Baldwin did not feel that Fort Custer demands a lot of police or fire presence. Ken Tsuchiyama stated the Industrial Park does have a desire for greater police and fire presence. There has been some thought to creating a police substation in the Robbins building. Although there has not been a demand for the fire department, it is security to have it there when needed. He asked Mr. Dehn to comment on companies regarding the temporary contracted work force. Karl Dehn noted the typical Fort Custer company has 5-10% employees hired by a temporary agency. A six-month evaluation process provides time to screen employees and evaluate skills, attendance, and ability to be trained before hiring employees full- time. Mayor Behnke asked how much value do companies place on whether or not we police tax abatements. Karl Dehn felt it important to look at what information is being asked, whether it’s relevant, does the city value it, and keep the employer’s perspective in mind. Comm. Baldwin commented that the information provided in the 2006 report was useful and asked if it could be updated. Susan Bedsole stated the report could be updated with the 21 companies that have expired within the last two years. Mayor Behnke asked if the Assessor has experienced problems with IFTs. Steve Hudson stated sometimes a company will exceed their original estimate and an amendment is needed. If they estimate less than what they ask for, it is generally not an issue. Comm. Baldwin asked who watches the employee numbers. Russell Claggett stated Contract Compliance looks at the numbers, and the data was included in the 2006 report. Susan Bedsole suggested creating a report at an end of a calendar year. She reported that the City averaged 9 IFTs in 2007 and 11 IFTs in 2008. Comm. Baldwin would like to see the report continued to be updated and the economic model information shared. 3 Karl Dehn indicated the model calculates estimated costs to the City for city services. He offered to provide a workshop on the economic model and demonstrate it for the Commission. Russell Claggett noted that sometimes the City asks a firm for information that the City does not require. For example, how many of the jobs are for city residents? As an employer, we are prohibited by law from requiring people to live within the city of Battle Creek. Jim Ritsema stated in the Act 198 policy, if a company would cease operations in Battle Creek, it would be responsible for the tax abatement for that year. As the economy gets tighter, it could become a policy issue. Ken Tsuchiyama summarized that staff will update the report and schedule another committee meeting. ADJOURNMENT: The meeting was adjourned at 2:20 P.M. 4