No Term Limit Here

December 22, 2006
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GRAND RAPIDS — City Manager Kurt Kimball said action on the issue was "important and urgent" for the city to keep the employees of the former Autodie International plant on the job, and the city commission agreed.

Commissioners approved a change in the "term sheet" for the Renaissance Zone they awarded MBtech Autodie LLC last month, the division of automaker Mercedes Benz that recently bought the struggling tool-and-die shop at

44 Coldbrook St. NW
. If they hadn't made the change, the state may not have ratified the zone designation.

A term sheet lists the criteria a company has to meet in exchange for the nearly tax-free status that a zone provides.

The change was necessary because the Michigan Economic Development Corp. decided it would rather give MBtech Autodie a MEGA job creation tax incentive rather than exempt a portion of the state taxes. So the company will receive a 3.9 percent tax credit on its payroll instead of an income-tax exemption.

When commissioners approved the zone, the term sheet required MBtech Autodie to post a $4 million performance bond with the city to guarantee its tax payments if the firm decides to leave before the zone expires, which is in seven years.

But with the change the MEDC made to the zone's benefits, the firm now has to post a $2 million performance bond to cover the city's taxes, including tax-increment payments of $29,464 to the Monroe North Tax Increment Financing Authority.

"There is no additional cost to the city. It's just a different formula, one the state prefers," said James Jendrasiak, 1st Ward commissioner.

As far as the city is concerned, the key provision in the term sheet remains the same and lists the minimum number of full-time workers the firm must employ at the plant over the next three years. MBtech Autodie has to have 150 workers by 2008, 175 by 2009, and 200 by 2010. If the company fails to meet a number for a particular year, the firm has to pay the city the income tax it would have received from those jobs.

Deputy City Manager Eric DeLong said the city will lose more than $93,000 in property taxes each year for giving MBtech Autodie a zone for seven years, which contains a complete exemption for the first four years.

But DeLong estimated the city will receive from $60,000 to $80,000 each year in income-tax revenue from the jobs at the plant. The average employee is expected to earn $27 an hour, plus benefits.    

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