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Village grants $222K in tax abatements

April 20, 2011 - In an effort to help improve the local economy and generate new jobs, two tax abatements worth a combined $222,141 were handed out last week to Royal Oak Industries by the Oxford Village Council.

"This sends a message that Oxford is open for business and that Oxford is an attractive place to do business," said Councilman Tony Albensi.

By a vote of 4-1, council granted a six-year abatement on personal property taxes to Royal Oak Boring, located at 650 and 700 S. Glaspie St. The abatement was based on the manufacturer's plan to invest $1.36 million in new equipment and hire up to seven new employees.

By a 3-2 vote, council granted a 12-year abatement on personal property taxes to Royal Oak Medical Devices, also located at 650 S. Glaspie St. The abatement was based on the manufacturer's plan to invest $2.95 million in new equipment, hire 10 new employees and retain one existing employee.

"For Royal Oak Boring, we've actually already hired the seven people that we planned on hiring," said Mary Jo Buschbacher, controller for Royal Oak Industries, which owns both companies and has had facilities in Oxford since 1996.

Buschbacher also noted both Royal Oak Boring and Royal Oak Medical Devices have already begun investing in the Oxford facilities as they each have purchased approximately $1.1 million in new equipment.

"In these hard times, I commend these folks for wanting to invest $1.3 and $2.9 million, which is going to help them grow," Albensi said.

The abatements granted by the village basically equal a 50 percent tax cut.

According to calculations made by village Manager Joe Young, Royal Oak Boring's abatement means the company will pay a total of $64,133 in personal property taxes over six years on its $1.36 million investment. Without the abatement, the taxes would be $128,266.

That's based on the 58.4961 mills that a business pays in village, township, school district, county and state property taxes. Included within the township taxes are separate levies for the general fund; police, fire and ALS services; the public library; and the parks and recreation department.

Royal Oak Medical Devices' abatement means the company will pay a total of $158,008 in personal property taxes over 12 years on its $2.95 million investment. Without the abatement, the taxes would be $316,016.

For just the village, which currently levies 10.62 mills, the abatements mean Royal Oak Boring will pay $11,643 in additional personal property taxes (instead of $23,286) over six years while Royal Oak Medical Devices will pay $28,687 in new taxes (as opposed to $57,374) over 12 years.

Immediately prior to the abatements' approval, the village held a public hearing regarding them. Opinions were mixed.

Jack Curtis, who sits on the township's planning commission and chairs the Economic Development Subcommittee, favored the abatements.

"I didn't look at it as supporting a tax abatement, I looked at it as retaining a business in our community," he said. "A wise old guy told me the other day 50 percent of something is better than 100 percent of nothing."

Retaining companies in these times is particularly important, according to Curtis, because Oxford is competing for businesses against other municipalities, counties, states and foreign countries.

Betty Young, who co-owns Mark A. Young Jewelers, expressed her concern about the "fairness" of giving one business a tax break when so many others in the community are in need of help.

"Why don't all the existing businesses get a tax abatement?," she said. "The downtown district businesses are struggling. A business next to us (A Familiar Taste) just folded. So, I hope you take that into consideration."

Local jeweler Mark Young told council he understood why Royal Oak Industries was requesting the abatements.

"I understand that business is very difficult and any edge or opportunity that you can use to reduce your costs (is) certainly important. That's what business is about," he said.

However, Young strongly cautioned the village to make sure it has "provisions and protections in place" in its industrial facilities tax abatement policy to ensure that both companies live up to their claims regarding the amount of new investment and job creation.

The village's abatement policy, adopted in July 2000, requires companies to submit initial and annual status reports and allows the municipality to review and audit, at the company's expense, the information provided "to determine compliance."

If a company defaults with regard to the promised investment, employment opportunities or construction/expansion, the village has remedies per its policy including reducing the abatement's term, revoking it and/or recovering "the amount of taxes which were abated."

Oxford Fire Chief Pete Scholz indicated he supported the abatements, but wondered how many Oxford residents will be hired as opposed to people from Detroit, Flint or elsewhere.

"I would like to see 10 Oxford employees as opposed to none," he said.

Buschbacher reported that eight new employees were hired in the last four months at the Oxford facility and three of them are Oxford residents.

"Our employment options are available to anyone, so if people from Oxford apply, they have as good a chance as anybody to get the position," she said. "It's better for us if you don't have a long commute."

Buschbacher noted that Royal Oak Boring currently has 29 employees. The manufacturer currently machines and supplies parts for Harley Davidson and will begin doing work for John Deere and Paccar (an engine building company) this year.

Royal Oak Medical Devices currently has 4 employees. It will hire 10 new people within the next two years and a total of 25 new employees over the next five years, according to Buschbacher.

All five village council members were supportive of giving abatements.

"I think it not only retains businesses, it attracts businesses to our community," Albensi said. "I would hate to have us lose businesses like this or other businesses to surrounding communities, surrounding states."

Albensi said tax breaks generate new jobs.

"It's abatements like this that's going to help those unemployment rates come down," he said.

Jobs are what "attracts and keeps our young people here," according to the councilman.

"(Young people are) leaving the state in droves," Albensi said. "It's a little step like this that's going to help the economic environment in this state."

Village President Teri Stiles noted how Orion Township used tax abatements to save its General Motors plant and keep it from closing.

She voted for the abatements in the hopes that they will provide Oxford residents with employment opportunities.

"We do have people in this community that need jobs," she said.

The only thing council disagreed about was the length of the tax abatements. Both Royal Oak Boring and Royal Oak Medical Devices originally requested 12-year abatements.

"I do believe that's too long," said Stiles, who ultimately voted for the six-year abatement for Royal Oak Boring and in favor of the 12-year abatement for Royal Oak Medical Devices.

Councilmen Tom Benner and Dave Bailey were opposed to giving a 12-year abatement to either company.

Council members Albensi and Maureen Helmuth supported 12-year abatements for both.

In the end, Helmuth compromised and voted for the six-year abatement for Royal Oak Boring.

CJ Carnacchio is editor for The Oxford Leader. He lives in the Village of Oxford with his wife Connie and daughter Larissa. When he's not busy working on the newspaper, he enjoys cigars/pipes, Martinis/Scotch, hunting and fishing.
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