An Infrequent Request
GRAND RAPIDS — City commissioners will hold a rare public hearing this week on a little known tax abatement, one that exempts a qualifying business’s personal property tax.
Almost all the abatement hearings the city holds are for manufacturers that are expanding their facilities or are buying new production equipment. Those requests fall under PA 198, the state law that gives tax breaks for up to 12 years to industrial firms.
But this time commissioners will hear from the Notions Marketing Corp., a wholesaler of craft items to retailers across the globe. The company’s request is being made through PA 328, the state law that abates all of a firm’s personal property tax if an applicant meets the requirements.
Dan Oegema, acting city economic development director, said PA 328 requests have been few and far between, because hardly anyone is familiar with the abatement and because it’s a tough one to capture.
“I don’t think it’s known that much in terms of the actual tax itself and the city policy requests that at least 25 new jobs be created. So it’s a big hurdle to jump over,” he said.
In comparison, manufacturers that file for PA 198 abatements aren’t required to create any new jobs.
“With 198s, we don’t require jobs. We do keep track of jobs, and we do say that it’s very important in terms of the overall project and the approval of the project. But there’s not a requirement for the jobs,” said Oegema.
In addition, a 198 only exempts half of the personal property tax while a 328 exempts all of it. Offices, warehouses, distributors and a few other types of businesses can apply for a 328, while a 198 is restricted to manufacturers.
The hearing will revolve around the plan Notions Marketing has to expand 540 Crofton St. SE, one of its five inner-city buildings. The firm will invest at least $3 million into a new conveyor and some new processing equipment there.
Having the PA 328 approved would save Notions Marketing $416,000 in personal property taxes over 12 years, which would cost the city $74,000 in revenue over that timeframe. But the company has pledged to create from 25 to 35 new jobs through the project. If the firm adds 35 employees to its current work force of 255, then the city would get $93,000 in new income tax revenue over those dozen years.
The project is the second Notions Marketing has undertaken in the last three years. In 2004, the company received a personal property exemption for a $2 million project at 1500 Buchanan Ave. SW. For that effort, Notions Marketing promised to create up to 46 new jobs. Within a year, though, the company exceeded its proposed goal and added 62 jobs to its work force from the project.
“They are a good producer of jobs for us,” said Oegema.
Notions Marketing stocks about 95,000 craft items for the 6,000 retail outlets its serves.
What might be another little known fact about this request is that the entire city has been designated as a potential brownfield, and that status has eliminated three steps from the 328 process, which means that Notions Marketing doesn’t need to get the Crofton facility designated as a qualifying district.
“Anybody in the city can do a brownfield project, if they do have the characteristics of a brownfield. So that act, which established the districts for all the brownfields, allows us to reuse that encompassing district and identify individual properties. We can start at that step instead of having to start by creating a brand new district for each individual property as we typically do for a 198,” said Oegema.
“If we didn’t have the entire city designated as a potential district there, (the request) would have to go through three more steps to actually create a district for that individual property and then go ahead with the application process,” he added.
Although 1st Ward Commissioner James Jendrasiak asked for more information on the filing from Notions Marketing, Deputy City Manager Eric DeLong seemed to indicate that Notions Marketing’s request would be approved, and not just because the company will meet the necessary requirements. DeLong thought the mood in Lansing would make the personal property tax, which has been criticized by a number of business groups, a thing of the past someday and possibly within the abatement’s 12 years.
“Eventually, there will be no personal property tax in Michigan,” he said.
The hearing will be held Tuesday night at City Hall.