City OKs Abatements For
Improvement Projects

July 29, 2007
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GRAND RAPIDS — City commissioners granted industrial tax exemptions last week to Paulstra CRC Corp. and Steelcase Inc.

But for the first time in recent memory, commissioners didn’t approve the Paulstra CRC abatement for the maximum time allowed under state law.

“In my recollection, we have not done anything less than 12 years,” said Dan Oegema, acting city economic development director.

Instead of giving the auto-parts supplier the full 12 years, commissioners gave the company an abatement for eight years.

“This will give Paulstra enough time to complete its work and make the city more competitive,” said 1st Ward Commissioner James Jendrasiak.

The abatement for Steelcase will run for the entire term.

Steelcase plans to invest up to $17 million to renovate its headquarters at 901 44th St. SE and the nearby Learning and Exploration Center. The office furniture maker expects to retain 59 jobs and add up to 15 new jobs from the project. The renovation work has been estimated to create $3.9 million in new tax revenue over 12 years, with $1.5 million of that total being abated during that period.

The city’s portion of the total tax revenue is $700,000, and half of that amount will be abated. But should Steelcase produce 15 new jobs from the project, the city would gain nearly $665,000 in income tax revenue over 12 years.

Paulstra CRC plans to invest $6.4 million in production equipment over two years. The purchase has the potential to produce $591,336 in new taxes over eight years, and $236,534 of that amount will be exempted. The city’s share of that new tax revenue is $106,440, and half will be abated.

Five of the board’s seven commissioners supported reducing Paulstra’s abatement term, after Jendrasiak made the motion to do so. The city granted Paulstra a 12-year abatement in 2003 for a $12 million investment in equipment and to expand its plant. The company pledged to create at least 20 new jobs in return for the abatement, and it did, adding 24 workers to its payroll.

But Oegema said Paulstra then contracted out its shipping department and let 42 workers go. Jendrasiak argued that left the firm with a net loss of jobs and the city with less income-tax revenue at a time when Paulstra had said it was going to increase its labor force. He was concerned the supplier might do the same once it received this tax break.

“There is no guarantee that if we give this company an abatement, there won’t be a loss of jobs. This amendment is not going to hurt this company,” said Jendrasiak.

“We’re going to give this company help for eight years and not 12 years,” he added.

But fellow 1st Ward Commissioner Roy Schmidt saw the situation in a different light. He said cutting Paulstra’s term by a third tells the company the city doesn’t want the $165,000 in income tax revenue it receives each year from the firm’s 388 employees.

“We basically told them to go look elsewhere, which I think is terrible,” said Schmidt.

Paulstra CRC told the city that it does not expect to create any new jobs from this equipment purchase. The company is located at 460 Fuller Ave. NE.     

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