GR set to OK Keebler project plan

December 4, 2010
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Grand Rapids city commissioners are expected to exempt the personal property taxes this week for an $18 million investment the Keebler Co. plans to make in its production facility at 310 28th St. SE. Board members will first hold a public hearing on the project Tuesday evening and then are likely to approve it, which will send the company’s request to Lansing for ratification by the state.

The Kellogg Co., which owns Keebler, is moving production of its Special K Breakfast Bars from Illinois to Grand Rapids, and the transfer will bring 45 new jobs here that will offer an average hourly wage of $23. The relocation will also help retain the 433 employees that make up Keebler’s local work force.

“We know that retaining jobs is just as important as creating jobs,” said Rosalynn Bliss, 2nd Ward city commissioner.

The tax abatement, allowed under P.A. 328, will be for 16 years. But it won’t go into full effect until the company’s Renaissance Zone expires at the end of 2017. Personal property taxes are exempted for firms in the zone. But companies pay a rising portion of that tax, along with the others that are exempted, in the last three years of a zone’s duration.

The city approved the 15-year zone for Keebler in 2002, so 2015 will mark the 13th year of the company’s zone designation, a year when 25 percent of the tax is due. The abatement will start in 2015 and about $10,000 in city taxes will be exempted that year from the Ren Zone’s tax levy, which will be equal to 25 percent of the firm’s personal-property tax bill in 2015. The abatement will continue through 2026, when more than $23,000 will be abated that year. The largest annual abatement will come in 2018, when $31,642 in city taxes will be exempted that year.

“It will not be of value to them until the Renaissance Zone burns out. They wanted a full 12 years on this,” said City Economic Development Director Kara Wood of Keebler’s request. “We negotiated, negotiated and negotiated.”

“Before the Renaissance Zone, they weren’t doing very well at that facility,” said Eric DeLong, deputy city manager, who added that The Right Place Inc. helped negotiate the tax break. “They’ve turned it around and now it is an efficient and successful plant.”

The city’s Economic Development office estimated that Keebler will have $283,085 in city taxes abated over the 16 years. But the office also projected the city will gain $401,267 in income-tax revenue from Keebler over that same timeframe. This means the city stands to net $118,182 more in income taxes coming from the plant than it will give Keebler in a personal-property tax break. An abatement would lessen Keebler’s total tax burden to the state and the city by nearly $818,000 over the 16 years.

Kellogg bought Keebler from Flowers Industries Inc. in October 2000 for about $3.6 billion. Kellogg is based in Battle Creek and is a leading cereal maker, while Keebler primarily makes cookies and crackers.

Commissioners also will hold two public hearings Tuesday for manufacturers wanting tax breaks under P.A. 198. One is Able Manufacturing, a small tool-and-die shop that makes machine parts at 601 Crosby St. NW for a number of industries. Able wants to buy three pieces of equipment for a total of $60,000 and has asked the city for a personal property exemption for the purchases. Wood said the exemption would only cost the city $360 a year.

“It was a business that was closing its doors, but he turned it around,” said Eric Soucey, with the city’s Economic Development office, of Doug Nyenhuis. Nyenhuis took an early retirement package from General Motors and used those dollars to buy Able.

“Even though the volume of their work is starting to grow, it’s (a) price competitive (industry) and their margin is very small,” said Soucey.

Able has four full-time employees, who earn an average of $19 an hour, and one part-time worker. “There are no new jobs to be gained by the purchases,” said Wood. “However, the equipment will contribute to the business being able to offer a wider range of services, which will help to keep the business viable in a competitive marketplace.”

Commissioner also will hold a hearing for Thierica Inc. The company makes interior components for the auto industry and interior manual guidance systems for the aerospace field. Thierica wants to purchase $661,000 worth of new equipment for its plant at 900 Clancy Ave. NE.

The tax break will cost the city nearly $1,400 a year in personal-property tax receipts. But the firm is expected to create five new jobs from the project, which will give the city an additional $1,300 in income taxes annually.

“They are actually doing very well,” said Wood of the firm’s recent performance. She said one reason for Thierica’s increased business is the company produces parts for the new Chevy Volt, the electric car recently introduced by General Motors.

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