LANSING — A new state law designed to aid small tool and die companies represents a “significant and important first step.”
But its long-term success hinges on to what extent local communities are willing to embrace the measure’s use, says the head of the Michigan Manufacturers Association (MMA).
The law, enacted early this year, allows tool and die companies of less than 50 employees to form collaboratives and seek approval for Renaissance Recovery Zones that would waive state and local business taxes for up to 15 years.
Approval for the zones and tax waivers would have to come on the state and local levels.
The law seeks to provide some assistance to the beleaguered tool and die industry, which has fallen on hard times the last few years because of a decline in the U.S. manufacturing sector and because of overseas competition.
The tax relief that the law provides to qualifying companies is necessary to preserve and shore up a critical component of Michigan’s manufacturing economy, said John “Mac” MacIlroy, president and CEO of the MMA.
“It’s a part of the sector that’s really had an exceptionally hard time the last few years,” MacIlroy said.
“It’s a craft and if you lose that for a generation, it’s very difficult to bring it back up.”
But the law can only work if local city and township officials are willing to use it and agree to give up the tax revenues, MacIlroy added.
And that may be a hard argument for some local officials to buy into, since the tax breaks the law allows aren’t for start-up companies or new business investments that create new jobs and additional tax base in a community, he said.
Businesses, manufacturers and tool and die companies need to “continue to tell the story” and make the case for support on the local level about the hard times the industry is facing, its importance to the economy and the need to preserve jobs, MacIlroy said.
“It’s a significant and important first step in identifying by legislation action that this is a critical component of the manufacturing industry.
“We need to sustain that kind of commitment” on the local level, MacIlroy said. “We need to look at it and see if this is an innovative approach that is going to work, and if it has staying power. If we can get that, then that develops a pretty good platform for us to go forward.”
The first round of applications from groups of tool and die companies seeking to form collaboratives is due Oct. 1.
Participants would have to comply with terms of the collaborative, which are intended to allow companies to leverage marketing and sales efforts, development of tooling standards and help specialized shops to compete.
Companies forming a collaborative would need to secure local approval first before filing a group application to the Michigan Strategic Fund.
Two companies in West Michigan — LS Mold in Holland and Zeeland Mold Technology in Zeeland — have recently approached local officials and asked for approval of a collaborative they’re forming with counterparts around the state.
A Senate Fiscal Agency review of the law when it was under consideration in June estimated that about 900 of the estimated 1,300 tool and die businesses in Michigan with less than 50 employees would qualify for a Recovery Zone designation.
The new law initially benefited companies that own their facilities. The legislature in late June amended the measure to include firms that lease their property and Gov. Jennifer Granholm signed the change on July 13.