Tax Abatement Committee

TAX ABATEMENT COMMITTEE CITY HALL – ROOM 302A 10 N. DIVISION BATTLE CREEK, MICHIGAN February 24, 2012 12:00 PM Present: Mayor Baldwin, via phone conference, Vice Mayor Elizabeth Fulton, Comm. Lynn Ward Gray, Comm. David Walters Staff: Ken Tsuchiyama, James Ritsema, Steven Hudson, Susan Bedsole, Eileen Wicklund, Vicki Houser Others: Karl Dehn and Doug Voshell, Battle Creek Unlimited Call to Order: Ken Tsuchiayma called the meeting to order at 12:04 p.m. Approval of Minutes: A motion was made by Comm. Gray, supported by Comm. Walters, to approve the minutes of the June 14, 2011 Tax Abatement Committee. All yes, none opposed. Motion carried. Public Comment: None. Committee Discussion: Mr. Tsuchiyama noted it was important to the City that the tax abatement process was a simple process for businesses that were considering investing in Battle Creek, stating PA 198 has been a very dependable means of encouraging businesses to locate and grow in Battle Creek. Mr. Tsuchiyama stated businesses have looked favorably upon Battle Creek due to our consistent support, and he noted the importance of continuing this support. Mr. Tsuchiyama noted the State Statute allows a 12 year tax abatement for real property, noting there is only a 6 year abatement for only personal property. Mr. Tsuchiyama stated the shorter time period for personal property was adopted due to the fact that a lot of equipment may not be useful for 12 years. Lastly, Mr. Tsuchiyama stated it would not make sense to make the tax abatement process more complex. Mr. Ritsema stated the City would like a change in the policy to consider whether a company is close to the current guidelines, the City should be flexible and consider a project if it is high in productivity, with high quality and exceptional value. Mr. Tsuchiyama presented an example for the committee to review, noting the changes were in blue type, noting staff made changes throughout the document instead of creating a new document. Mr. Tsuchiyama noted the acquisition of personal property will be based on projects achieving up to a maximum of 12 years. Mr. Voshell stated the guidelines will allow all applicants to know what is available, noting the formula for the determination of 6 or 12 years was sometimes complicated. Mr. Dehn noted this was important regarding commercial property, whereas industrial projects don’t get into how many jobs there are for 4 or 8 years, stating this new way was more simplified. Ms. Wicklund stated she wanted to make sure there was not a misconception of unfairness, questioning the basis for not giving every company the 12 years abatement Mr. Dehn noted PA 328 is based on a sliding scale, stating he would like flexibility for everyone. Mr. Dehn further noted they may combine PA 328 and PA 198 on the same project. Ms. Wicklund noted the requirements needed to specify why one project may be different than other projects. Mr. Voshell stated the cut off would be $100K. Comm. Gray inquired as to how often PA 198 and PA 328 are combined. Mr. Dehn noted companies rarely used PA 328, stating they negotiate with companies so they know the abatement is only for 12 years, unless something else is negotiated. Ms. Wicklund stated Battle Creek Unlimited would present to the City if a lesser recommendation is warranted. Mr. Tsuchiyama noted most of the negotiated details are determined prior to submittal to the Commission, stating the world of economic development and tax incentives are always changing, stating the balance between specificity and flexibility needs to work so not to limit the opportunities. 1 Mayor Baldwin expressed a concern regarding definitions of industrial and commercial, and that companies may try to get higher numbers so that they meet the longer term. Mr. Voshell noted the classification would be determined by the Michigan State Department of Treasury. Mayor Baldwin questioned why the committee did not use a sliding scale, expressing her concern that $100K was not a lot for a twelve year period. Mr. Voshell noted the $100K has been in the guidelines for years. Mayor Baldwin asked why they moved from 6 to 12 years. Mr. Dehn stated they are going from 6-12 years for personal property only, noting a company could invest $500K, $10K in real property for 12 years, but with a minimum of $100K, any incremental amounts could limit the number of small companies considering investing. Vice Mayor Fulton noted Battle Creek Unlimited would discuss options with potential investors, noting BCU will work through the research and details. Comm. Walters asked if there was a downside going from 6 years to 12 years. Mr. Dehn noted there was not a downside, it could produce a handful of projects, noting years 7-12 got a little more revenue. Mr. Voshell noted some businesses realized that if they put $10K in real property, they could have longer abatements. Mr. Ritsema stated that from a City perspective, the jobs retained or created offset the lost revenue. Mr. Tsuchiyama noted the TIFFA was a concern, reminding everyone that uncertainty is fearful, but the City needs to think of all of their options and take advantage of a tool that attracts business to the City. Mr. Tsuchiyama stated the committee should first simplify and clarify the process, noting that if a new district needs to be established, the approval time will be extended. Ms. Wicklund asked how we determined a new district needed to be established. Mr. Dehn confirmed BCU will be familiar with the current districts and determine if a new district is needed. Ms. Bedsole recommended the Commission hold the Public Hearing and the resolution at the same meeting, noting that if there was an issue, the resolution could be postponed to the next Commission meeting, stating there have not been issues historically. Mr. Hudson stated this arrangement would work best for company representatives as many are coming from out of state, or even out of the country. Mr. Hudson noted both the public hearing and the resolution have been done at the same meeting so as to meet the October 31st deadline. Mayor Baldwin expressed a concern that residents would have an issue with the resolution at the same meeting as the public hearing, stating they may think the Commission did not take the time to review the request. Mr. Tsuchiyama stated he did not remember anyone other than the company appearing at the public hearing to speak, noting that if someone had an issue, the resolution could be postponed to the next meeting. Mr. Tsuchiyama noted item #4 is just explaining the process, noting applicants wanting to have approval by October 31st must submit the completed application to the City by September 1st. Comm. Gray questioned whether this would provide enough time if the district needed to be established. Mr. Hudson stated the public hearing and the resolution to establish the district could be completed at one meeting, and the public hearing and the resolution approving the tax abatement could be conducted at the next meeting. Comm. Gray expressed a concern that several companies would try to submit just prior to the deadline. Mr. Tsuchiyama noted staff would have 60 days based upon publishing of the Public Hearing and the resolution. Mr. Hudson noted staff still tries to get the public hearing and the resolution to the Commission for approval before October 31st. Mr. Tsuchiyama stated the City did not want to turn down applications just due to timing, noting staff will still try to get the approval to the State by their deadline. Mr. Dehn noted a material change on page 4. 2 Mr. Ritsema noted they may consider additional considerations. Mr. Ritsema noted #6 recognized technology changes; substantial training of the existing workforce, noting staff would be getting better skills. Mr. Hudson noted item #10, stating the current guideline wages of $16 per hour with benefits, noting that if they do not meet the exact criteria, staff would review on an individual basis, although they may not meet $30 Million investment and 100 jobs, but be flexible, noting that if a company meets some of these, they still may benefit, and be approved. Mr. Dehn noted PA 328 doesn’t just say 12 years, but shows other benefits. Mr. Dehn stated BCU would work with the City, noting PA 328 would not be a standard project, noting it will always come with recommendations on why it would be beneficial. Comm. Walters questioned whether the changes affected any current projects. Mr. Dehn confirmed it does not affect current projects. Comm. Walters expressed his approval of the tax abatement opportunities, stating the Commission should agree to the proposals. Mr. Tsuchiyama stated the tax abatements fit with current guidelines, noting it was important for potential applicants and future commissions to remain flexible. Mr. Dehn noted the entire City of Battle Creek is considered a Brown Field district, eligible for PA 328. Mr. Hudson questioned the areas of Northpointe Woods and out on Dickman. Ms. Bedsole noted the likelihood a new district would need to be established was low. Mr. Dehn noted that PA 328 would be in areas that already qualify. Mr. Tsuchiyama asked if the committee was comfortable with the changes and if another meeting would be needed, as they were not changing anything substantiate. Ms. Wicklund noted the Commission would need to approve the revisions. Mr. Tsuchiyama stated he would send the revisions to the Commissioners for review and wait for comments and questions to determine where to proceed. Adjournment: The meeting was adjourned at 1:09 PM. 3