Steelcase Taxing Issue For Commissioners

June 12, 2006
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GRAND RAPIDS — City Treasurer Al Mooney reported last week that Steelcase Inc. owes the city $127,391 in abated tax payments from an industrial facility exemption the company received five years ago.

But the city doesn’t seem too eager to recapture those tax dollars.

The office furniture-maker requested the exemption, which the city and state approved in 2001, for the Leap chair plant at 4060 Eastern Ave. SE. But that building sits on land that Steelcase said it intends to sell to Ashley Capital, a New York real estate firm, and Steelcase plans to move the chair production to another location well before the exemption ends.

Doing so, though, will mean that Steelcase won’t be able to fulfill its obligation under the exemption, which gave the firm a tax abatement through 2014 for the purchase of machinery and equipment to produce the chairs. Steelcase said it spent slightly more than $3 million on that purchase.

Mooney calculated that the exemption saved Steelcase $83,423 on its summer property tax bill and $10,184 on the winter version from 2002 through this year. The company also had $33,784 in taxes to the Godwin Public Schools, the part of which sits on city land, abated from 2002 to 2004.

Mooney also noted that Steelcase owed the Kentwood Public Schools $93,606 for taxes that were abated from 2002 to 2006.

The exemption, which was authorized under Public Act 198, saved Steelcase a total of $220,997 in tax payments since 2002, when the Kentwood figure is added to the city’s total.

Deputy City Manager Eric DeLong said that Steelcase hadn’t asked for the debt to be forgiven as of last week, and the firm was compiling a list of the taxes that were exempted. He also said the company told the city that the chairs wouldn’t be made in Grand Rapids.

“Not every company would have approached us. They’ve been very responsible,” said DeLong.

“I think, for a number of reasons, Steelcase has been a good corporate citizen, so it is my recommendation that we not recapture the tax dollars,” DeLong added.

But 1st Ward Commissioner James Jendrasiak didn’t agree. Jendrasiak is one of three city commissioners who sit on the Economic Development Project Team, the group that heard the Steelcase situation, and he said the sale of the company’s property will probably result in more tax abatements.

Jendrasiak also said that average citizens are struggling to pay their property taxes, and no one at the city is forgiving their tax payments. He added that residents who can’t pay their taxes are selling their homes.

“To let it go by the wayside, I think, is terribly wrong,” he said. “I can’t support not collecting those taxes.”

Third Ward Commissioner James White, though, said Steelcase should be given more leeway in this matter because the company is keeping its headquarters in the city. He also said Steelcase had likely spent much of the exempted tax dollars to sell the property, a move that should put more tax revenue into the city coffer.

“You’re both right,” said Mayor George Heartwell.

The mayor added that the city has recognized good faith efforts before and has waived taxes that were owed. He said he has worked closely with Steelcase on previous projects and trusts the company’s officials.

Heartwell also said he was convinced that the development likely to come from the 206 acres that Steelcase has offered to sell would end up generating more tax dollars for the city than the manufacturer could produce by itself.

“I’m convinced that this will be a very good thing for the city,” said Heartwell. “I’m prepared to support a waiver of the recapture.”

But Kimberly Van Dyk, executive director of Neighborhood Ventures and a member of the development team, suggested the city forge a settlement with Steelcase on the taxes it owes. Van Dyk asked why it had to be all or nothing.

“Let’s wait for them to ask (for the taxes to be forgiven),” said White.

What Ashley Capital intends to build on the property isn’t clear yet, except that the development will likely be a mixed use that could include housing units. The deal isn’t expected to close until the end of this year. Steelcase has signed a letter of intent to sell the land to Ashley Capital, but that letter is non-binding.

“Steelcase is going to make a profit on that sale. They’re not going to sell it for a buck,” said Jendrasiak.

Jendrasiak pointed to the cuts the city has made in public services over the last four years and the city employees who have been laid off over that time.

“Yet, we can say, they can walk away. An agreement is an agreement,” he said. “Go out and drive in our neighborhoods and see how many houses are for sale.”

Tax Savings From Exemption

GRAND RAPIDS — The following chart lists the summer and winter tax savings and the school taxes that were abated for Steelcase Inc. when the company was granted an industrial facility exemption in 2001 for the firm’s Leap Chair Plant at 4060 Eastern Ave. SE.

   

                            2006          2005          2004          2003          2002
Summer Tax     $14,376     $17,742     $20,087      $22,375      $8,843

Winter Tax         $1,369      $1,690        $2,729        $3,153      $1,243

Godwin Schools        $0             $0        $8,349      $11,670    $13,765

Totals             $15,745      $19,432      $31,165       $37,198    $23,851

Note: 2006 figures are estimates and taxes were rounded to the nearest dollar.

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