Toolers See Worst Of Wyoming

September 15, 2006
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WYOMING — The passing of today’s deadline for third-round applicants to the state’s tax-free Tool and Die Recovery Zones further reinforced what has become a worst-case scenario for toolmakers in the city of Wyoming.

As a direct result of the controversial tax abatement, nearly an entire industry segment is now at least investigating the possibility of moving out of the city. Among these are many firms that had once praised the municipality for its pro-business philosophy, but now are shocked at what many describe as shortsighted, adversarial and often insulting behavior by the administration.

“I am moving. In my book, I have absolutely no choice but to move,” said Pat Roys, owner of Rapid EDM Service.

Wyoming is the only West Michigan municipality to unilaterally refuse granting the controversial tax abatement enacted by the state in 2003 as an incentive for tool and die firms to adapt a collaborative model. Under the recently expanded criteria, any toolmaker with 75 employees or less can be relieved of nearly all state and local taxes with membership in a coalition and municipality approval.

With the exception of funds for schools and libraries, the municipality sacrifices all of a Recovery Zone firm’s tax revenue, with no promise of job growth or investment in return. And unlike a Renaissance Zone, it is limited to a specific industry.

“This is different than traditional tax abatements,” said Ray DeWinkle, vice president of The Right Place Inc., who serves as a local liaison for municipalities with zone concerns. “Like a Ren Zone, it takes an existing revenue stream and eliminates it. I think Wyoming is wrestling with that. They’re looking at a challenge from continued revenue sharing cuts, and weighing this tool (versus) their budget constraints.”

Many communities voiced strong opposition to the legislation, but at least in West Michigan, only Wyoming has not taken positive action. In the Detroit area, opposition is much more common, with many local governments saying they cannot afford the tax breaks. As a result, 90 percent of the 125 Recovery Zone firms hail from the west side of the state. KentCounty has by far the most, with 33 companies in 10 coalitions — making Wyoming an island of disadvantaged firms.

“I was vehemently opposed to this when they created it,” said Bill Berry, president of Die-Tech & Engineering Inc., a 40-employee moldmaker. “And it turned out how I most feared it would.”

Although it was facing the same challenges as its regional peers, Die-Tech was a productive and profitable enterprise when the legislation was drafted. Today, the tax-free status of his regional competitors has erased the efficiency advantage it once held.

“If they were 3 percent below break-even, and I was 3 percent above, look what happens when you give them a 6 percent break,” Berry said. “You don’t want to drag underperforming companies up.”

Berry voiced his opposition to the state, even hosting Senate Majority Leader Ken Sikkema, R-Wyoming, in his facility. With no help there, he has found the city’s stance especially frustrating.

“They said, ‘Why should we give that to you? We don’t have enough tax money; manufacturing is dying anyway. We don’t do this for retailers,’” Berry recalled of his conversation with city officials. “I can’t blame the city for not wanting to lose taxes, but if you want to keep industry here, everyone needs to sacrifice.”

Berry does not plan to move, although he has investigated doing so. The cost of relocating his multi-million-dollar facility, which he owns outright, would be much more than the abatement could provide. If he expands, however, he will do so elsewhere.

“I can’t understand why the governor would sign something into law that would leave this up to the city of Wyoming,” said Phil Parsh, president of Robb Machine Tool Co., a seven-employee, 46-year-old Wyoming firm. “Now I’m having trouble competing against firms three miles away from me, much less China. It just isn’t right. This is America; the guy two miles down the road shouldn’t have a different set of rules than what I have.”

If his firm could handle the expense, it would already have left Wyoming, Parsh said, but it is not financially feasible to do so at this time.

Some firms have already moved. Last year, Legacy Precision Molds Inc. relocated to Grandville after “being shut down” by the city. Company President Tom Van Ree said the neighboring city welcomed him “with open arms, and gave us the green light all the way” for his firm’s Recovery Zone application.

Deputy City Manager Barbara VanDuren noted that no firm has even applied for the Recovery Zone in Wyoming. There are at least 15firms that qualify for the abatement, according to The Right Place Inc. Regional Manufacturers Directory. It is unknown how many of those have been informally rebuked by the city, but DeWinkle knew of at least nine firms that had inquired.

“Nothing formal has been brought forth,” said VanDuren. “But they probably would not have been approved; they realize that and don’t bring the applications forth.”

Had things gone differently, Rapid EDM could have been the first application. Instead, his only concern as to a relationship with the city is to facilitate a smooth transition to another community and the sale of his current facility. Like two other firms, one for each round of recovery zone applications, Rapid EDM only made it as far as a city council’s work session meeting.

Roys said that he had intended to submit an application, hoping that he could sway some of the new council members to his cause. With no guarantee of even being put on the agenda, Roys’ attorney advised him not to move forward when the stringent requirements of City Manager Curtis Holt could not be compromised. Those requirements include submitting five years of complete personal and company financial records to public record. No other West Michigan municipality has made such a requirement.

Roys has none of the press pits or other machinery that would prevent him from moving, so he will do so at his earliest opportunity.

The Business Journal could not find any public record of Roys’ petition. Little of the city’s recovery zone discussions appear to have taken place in the public setting, but it is believed that the first firm to approach the council was Detail Technologies Inc. in 2004.

That company has actually nearly doubled since that time, growing to 65 employees. The firm is looking to expand within the next 12 months, and indicated that if there is a fourth round of Recovery Zones, it will seek admission through the city, or move.

“To be fair, the city has helped us out a number of times with tax abatements,” said General Manager Doug Vriesman. “But with this they were, quite frankly, rude.”

During his work session, Vriesman was not able to make his case to the council, with council member Bill VerHulst moving to table all discussion before he could speak. The next day, Vriesman actually received a call from another council member apologizing for the city’s actions.

Vriesman hopes that with three new council members, the sentiment will have changed when he reopens the case next year. He believes that if the council were to take a closer look at the numbers, it would find the revenue loss much smaller than it assumes.

Spencer Bertram, one of the new council members, indicated that he would indeed be open to reviewing the Recovery Zones.

“I think we should at least take a look at them,” he said. “I’m not personally opposed to it, if they could make a solid case to give up the tax revenue.”

DieTron Inc., a 65-employee firm, has also found it would be too expensive to move.

Vice President Dave Rose contacted Wyoming Mayor Carol Sheets about the issue last month, curious if the city had changed its stance under the new administration.

Her response, via e-mail: “Our stance on Tool and Die Recovery Zones has not changed and in fact is more set due to the legislature ending the SBT in 2007 with no plan to replace that lost revenue. … Should the tenor in Lansing change, we will certainly listen again.”

Ironically, Die-Tech, Rapid EDM, DieTron Inc. and Detail Technologies are all actively involved in coalitions. Robb Machine Tool was the other company involved in a work session.    

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