GRAND RAPIDS — The City Commission granted Steelcase Inc. final approval for Public Act 198 tax abatements for three projects the company plans to undertake this year at a total cost of $7.4 million.
The first project involves purchase of $3 million in new equipment to be used in the manufacture of the Leap Chair. The second project calls for a $1.5 million investment in machinery and equipment that will be used to manufacture the new Answer panel system. Lastly, the company plans to put $2.9 million towards upgrading technology at its corporate center to streamline manufacturing.
Steelcase will now receive a 50 percent abatement of property taxes on those equipment purchases and upgrades for the next 12 years.
James Jendrasiak of the city’s 1st Ward was the only commissioner to vote against granting the tax breaks. The abatements didn’t sit well with him for a couple of reasons.
In August, Steelcase announced it was acquiring Custom Cable Industries, a Tampa, Florida-based manufacturer of office communications cabling systems, and later that month announced it also was purchasing PolyVision Corp. of Georgia, which makes information display products for schools and offices. The PolyVision Corp. deal is valued at $176 million.
“The fact is they’ve got the money to invest to buy companies out of state, yet they’ve got to come to us with their hand out saying ‘we need tax abatements,’” Jendrasiak said. He suggested the city reduce the company’s tax abatement from 12 to six years.
Jendrasiak also took issue with the fact that no new jobs will be created with the Steelcase projects when new job creation is at the heart of P. A. 198 tax abatements.
In late September, Steelcase notified its employees that as many as 1,000 additional workers may have to be laid off in coming months if business doesn’t pick up. Since last December, the company has cut some 3,500 temporary, hourly and salaried positions worldwide.
Second Ward Commissioner Rick Tormala, who said he would normally side with Jendrasiak on those issues, said Steelcase has been a good corporate partner for the city — better than a lot of companies, he added.
“In an economy like this, I see this as a kind of economic stimulus package. I more prone to looking at granting a tax break in poor economic times,” Tormala said. “I’m certainly all for creating jobs but Steelcase is competing in a global market. Perhaps by granting this we can save some jobs.”
Tormala said in the future the city has to look at firming up its policy on tax abatements, because some companies have been approved just for making investments and not actually creating new jobs. “I think we need a consistent policy,” he said.
According to the city, the Steelcase projects will produce up to $1,030,000 in new taxes of which $585,000 would be paid and $448,000 would be abated. The city’s portion would be $186,00, of which $93,000 would be paid and $93,000 would be abated over the next 12 years.
Steelcase pays the city $4.8 million in property tax and $250,000 in corporate income tax. The company currently employs 9,383 in the metro area and 5,600 in Grand Rapids.
The city has granted Steelcase seven tax abatements since 1975, five of which have already expired. The seven projects collectively represented a $91.8 million investment and the creation of 724 new jobs over the years.