Pledge Time For Zone Applicants

August 5, 2007
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Focus Mold & Machining and STM Manufacturing will likely be among the last companies to form a collaborative under the state’s Tool & Die Recovery Zone program.

The nine-year-old Walker mold maker and the Holland die and machine shop have been approved by their respective municipalities for recovery zone status and will likely join an as-yet-unnamed coalition being put together by the Michigan Manufacturing Association in partnership with Hartford-based O’Riley Consulting and the Detroit office of law firm Butzel Long.

The window of opportunity for tool and die firms to take advantage of the Recovery Zone program is rapidly closing. The deadline for what will likely be the last round of applications is Sept. 17; the last two of a maximum 25 coalitions of companies with the nearly tax-free designations should be named from those applications.

Each round of applications has been hotly contested across the state. With no requirement for investment or job creation, many municipalities have been wary of the industry-specific program. The cities of Kentwood and Holland have opted not to grant Recovery Zones for the maximum 15-year period, only providing the designation for 10 and six years, respectively. The city of Wyoming and most municipalities in the Detroit area have refused to participate in the program.

Unlike the 68 companies in last year’s third round of applications or the 126 firms in the previous rounds, this year’s applicants are facing a limited supply of available coalition seats. The MMA coalition that Focus Mold & Machining and STM Manufacturing will likely join has 21 applicants for a possible 20 spots. Existing coalitions are skeptical of new members.

“I wish we would have joined up when this first started out,” said STM Manufacturing President Roger Blaukamp, whose 60-employee firm did not qualify for the program until the law was rewritten to allow firms of up to 75 employees last year. “Even though we didn’t qualify for the tax benefits, we could have joined a coalition and already started collaborating.”

STM Manufacturing contacted a number of existing coalitions, at least one of which is still considering admitting the 28-year-old firm, before signing on with the MMA coalition.

John Czarnecki, the Michigan Economic Development Corp. vice president responsible for administering the program, said he has received several complaints from current applicants that are being turned away by the existing coalitions.

“I tell them that it’s between them and the collaborative,” he said. “If the collaborative isn’t willing to accept you, they don’t have to. If you want them to help you become tax-free, you need to bring something beneficial to the table.”

Unanimous approval is required to expand a recovery zone coalition.

“You have to look at the talents of each company,” said Michael Hartley, president of Apollo Tool & Engineering in Walker and chairman of the year-old Tool Makers Alliance. “If we could add an individual that could add to what we are able to offer, that’s one thing, but I would not like to have a competitor within my own collaborative.”

The 10-member Tool Makers Alliance is currently debating whether to add a pair of current applicants to its roster. Another local collaborative, the Great Lakes Tool & Die Collaborative, the first group organized with MMA assistance, has already committed to adding two new members: POM Group of Auburn Hills and Ravenna Pattern in Ravenna.

“They’ve got some innovative technology and capabilities we don’t have,” said Bob Sloma, president of J.S. Die & Mold in Bryon Center and collaborative chairman. “One has a direct metal deposition process that we’re pretty excited about. It’s going to give us a competitive advantage.”

Those two additions, plus another three last year, bring the group’s membership to 16. With only four spots remaining and two other applications under consideration, Sloma said the collaborative is making an effort to become much more selective.

“If somebody wants to just come in and do the minimum to get the tax break, that’s not going to help us attract customers,” said John Szot of Enterprise Tool and Die in Grandville, spokesman for the United Tooling Coalition. “We’ve had requests and we’re not interested. We need to know that you can bring something to the party.”

The UTC is one of a select number of coalitions that include members too large to qualify for the Recovery Zone program, which is limited to companies with fewer than 75 employees. Of the two members it has added, one qualified for the tax break.

“There really is no incentive for an established coalition to take on a new member,” said Jay Baron, president and CEO of the Center for Automotive Research in Ann Arbor and the driving force behind the collaborative tool and die business model. “They have to have something complementary to offer.”

Czarnecki, who will oversee applications as they arrive next month, said that his greatest fear is that there will be three solid applicants for the remaining two spots.

“I’ll shoot myself,” he said. “It would be an entirely subjective evaluation on our part. The legislature gave us no objective criteria for evaluating these.”

The MEDC has rejected four applications previously, all for failing to show intent to collaborate. There are no criteria beyond that.

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