Tax Abatement Committee

TAX ABATEMENT COMMITTEE CITY HALL – ROOM 302 A 10 N. DIVISION BATTLE CREEK, MICHIGAN FEBRUARY 12, 2009 3:00 P.M. PRESENT: Mayor Behnke, Vice Mayor Walker, Comms. Susan Baldwin, Comm. Hersha (Arrived at 3:16 P.M.) ABSENT: None. STAFF PRESENT: Ken Tsuchiyama, Jim Ritsema, Susan Bedsole, Dee Laser, Steve Hudson, OTHERS: Karl Dehn, Doug Voshell PUBLIC COMMENT: None. CALL TO ORDER: Mayor Behnke called the meeting to order at 3:07 P.M. Ken Tsuchiyama reported at the last meeting the economic impact model was discussed and he asked Karl Dehn to speak about the Battle Creek Unlimited model. Karl Dehn illustrated the software model for IFTs that was customized for Battle Creek. Output tables include General Fund, TIFA, DDA, LDFA #1, KDFA#2, Lakeview DDA, and Brownfield. There is an ability to develop charts from the data, and income tax revenue can be estimated. Multiphase projects can be entered. Mayor Behnke asked if there were any questions of the committee. Comm. Hersha questioned what went into the net benefit. Karl Dehn stated the first page depicts the incentives and investment. The model also factors in the cost of the city to deliver services, i.e. infrastructure. Comm. Hersha asked if fire or transit services were factored into the costs. Karl Dehn responded that it doesn’t get that detailed. Comm. Hersha asked if it factors in how many people will actually be living in the community after the project is completed. 1 Karl Dehn noted about 30% of Fort Custer employees live in Battle Creek. The strategy study data (30%) is then considered the assumption. The model calculates what the impact is to the city. Ken Tsuchiyama asked if the committee had a chance to review Susan Bedsole’s report and if the City is on track for monitoring IFTs. Mayor Behnke felt the data was very meaningful. He noted that Kellogg’s recently provided a letter to the City showing they had surpassed what they intended to do. Comm. Hersha commented that the report was very constructive. Ken Tsuchiyama noted some of the tax abatements are approved with little questions, others not so. With some of the questions raised by the Commission, the City does not want to send the wrong message to businesses. If issues can be asked in advance, it often clears things up. A great amount of staff work goes into preparing the request for abatement. It would be helpful to have dialogue about what information is important to the Commission. Mayor Behnke felt that BCU would only bring those companies forward that would create jobs. The tax breaks that need to be distributed are absolutely necessary. He used United Solar as an example and did not realize that prevailing wage would have been such a topic of discussion. Ken Tsuchiyama stated United Solar was an anomaly, which was a complex request in a six-week time frame. With companies like Denso or Kellogg’s, they make retention requests with jobs tied to a project. He stated the City works hard at establishing relationships with companies, and we would not want to offend anyone. Vice Mayor Walker would like to see the number of minority employees included in the report to get a better handle on who is being employed by a business. Susan Bedsole said that information is still gathered and could easily be added. Vice Mayor Walker believed it was important to know that companies are making a genuine attempt at doing better. Citizens like to know there is a return on the investment. The model was used to evaluate infrastructure in substantial investments and was not intended to be a policy according to Karl Dehn. Comm. Hersha believed there was value in how we communicate to businesses. His concern was when we are considering deciding whether a corporation gets a tax break, that the Commission receives as much information as possible. BCU’s job has a different role than City Commission’s role to the taxpayers. Comm. Hersha did not mean to be combative; however, he felt information asked of Denso and Kellogg’s was not an unusual request. 2 Ken Tsuchiyama appreciated the comments and would also like to see consistency in information asked of companies. Comm. Baldwin asked if companies would think Battle Creek was asking for a lot of detail. Karl Dehn said some companies will share information with them, but not in a public forum. Companies have competitive concerns and might shy away from specifics. A question like, Do you provide health benefits, yes or no, is a better question. He noted that companies cannot put temporary employment on the application. Susan Bedsole said a standard would need to be set. Comm. Hersha stated in terms of how we communicate, he would like to see a more refined approach. Comm. Hersha hoped as an outcome from the committee that standardized questions could be developed for abatements. He would like to see more information available for the Commission to make a decision. Mayor Behnke would like to see what other communities are requiring regarding abatements. Are we doing anything differently than Kalamazoo or Grand Rapids? Karl Dehn felt that Battle Creek requires more information, particularly with contract compliance. Assessor Steve Hudson indicated the City tries to tailor our criteria based on what the State Tax Commission requires. Doug Voshell stated the MDEC reviews the application to see if the district was created properly, and then the application is forwarded to the State Tax Division. Mayor Behnke asked how many applications are returned. Susan Bedsole commented that some items are cleared up by the Assessor and sometimes a company is asked to complete or clarify information. Health Benefits, wage categories, local hire are important questions according to Comm. Hersha. The City Manager asked what information is not being provided and to allow BCU and staff determine questions that should be asked. Mr. Tsuchiyama would like to know if the information would be helpful to all commissioners. Mayor Behnke would like to see an informal survey sent to larger municipalities in what they are doing in regards to IFTs. 3 Susan Bedsole stated that she added expired certificates to the report. Sometimes it is important to see the history. Does the committee want historical data as well as active IFTs reported? Comm. Baldwin felt the list provides a good trail of information on who have been good corporate citizens and how often they make requests. Comm. Hersha would like to see how the workers in Battle Creek benefit. Karl Dehn suggested a question regarding median wages of businesses could be asked. Comm. Hersha would like to know entry-level wages. Mayor Behnke asked if the City Manager could survey the rest of the Commission. APPROVAL OF MINUTES: A motion was made by Vice Mayor Walker, supported by Comm. Baldwin, to approve the November 17, 2008, meeting minutes. All yes. Motion carried. Comm. Hersha congratulated BCU on the United Solar project and hopefully together parties can come up with an IFT process that is not cumbersome. ADJOURNMENT: Mayor Behnke adjourned the meeting at 4:25 P.M. DAL 4