City approval for Metric Die & Engineering Inc. and Michigan Wire EDM Services Inc. would allow the companies to skip a year’s worth of tax payments and join other firms of roughly their size in an association that would hopefully advance their businesses.
The program, known as the Renaissance Recovery Zone, is designed to help tool-and-die makers with 75 or fewer employees compete. Companies that are successful in joining the group can be exempted from most state and local taxes — except the state sales tax — for up to 15 years. Only a graduated payment of those levies would be required for the last three years.
If this scenario sounds a lot like the better known Renaissance Zone, it should, because the Recovery Zone is part of the 1996 legislation that created 11 Ren Zones across the state.
Commissioners held public hearings last week for both firms, and the city needs to make its decision this month because both applications are due in
“Twelve total companies are working on putting this new collaborative together,” said Daniel Oegema, economic development coordinator for the city.
The collaboratives aren’t bound by geographic locations, other than having to be a
Michigan Wire, at
, opened for business in 2003 with two employees and a pair of wire EDM machines. Three years later, the company has five full-time workers, one part-time employee, five wire EDM machines and an EDM drill.
EDM, or electrical discharge machining, is a highly precise manufacturing process for creating complex or simple shapes within parts and assemblies. Analysts say EDM is an affordable process when a low parts count or a high accuracy is needed. There are two basic types of EDM: probe, or a die sinker, and wire like Michigan Wire uses.
“We would like to continue to grow by adding equipment or updating to newer equipment and possibly adding more employees, but it is becoming more and more challenging in this economy. Replacing older equipment is a critical issue in staying competitive in today’s market,” wrote Vern Hyatt of Michigan Wire in the company’s request to the city.
Hyatt said outsourcing, downward pricing and bankruptcies filed by Tier 1 companies, such as Delphi and Tower, were the biggest obstacles that smaller firms like his are facing.
“The bankruptcy issues are causing the payment schedule for second (and) third tier companies to go from 30 to 60 days, to 90 to 180 days or more, in some cases,” he said.
Metric Die started with 10 employees nearly six years ago and now the company at
has 14 workers. Jim Kammer, of Metric Die, told the city that his firm also needs to upgrade its equipment to remain competitive.
“Although we have had to make painful cuts in the last four years to allow ourselves to be competitive in the new world marketplace, we still need help wherever we can find it. These are still good-paying manufacturing jobs that I believe are very important to
Kammer tagged on taxes and the high price of insurance to Hyatt’s list of problems that their respective businesses are facing.
Oegema said Michigan Wire could save $24,400 a year on real and personal property taxes, corporate income taxes and the Single Business Tax. The city would lose $4,280 a year in tax receipts by granting the company’s request.
Because it’s a larger firm than Michigan Wire, Metric Die stands to gain even more from the tax break. Oegema said the company would save $33,700 a year in tax payments and the city would give up $4,172 in tax receipts.
School districts, community colleges and libraries won’t lose tax revenue from the collaborative, as the state Treasury Department will reimburse those groups.
In addition to gaining the city’s approval, Michigan Wire and Metric Die would have to engage in sales and marketing efforts with the collaborative. Both would have to develop processes, tooling standards and project management strategies through the group, improve their ability to develop expertise, and compete successfully on larger programs.
The state limits the number of tooling firms in a collaborative to 20, and it does that by using a first-come, first-serve basis. Although it’s not a do-or-die time for the tool-and-dies, city commissioners do need to act relatively quickly, because timing may be everything for Michigan Wire and Metro Die.
“They can join the collaborative without getting city permission. But they won’t get the Renaissance Zone benefit unless the city agrees to give up the taxes and the state approves them,” said Oegema.
“Both are relatively small firms. Basically, the first 20 firms that get approved will get into the collaborative.”