SPECIAL MEETING OF THE COUNCIL OF THE CITY OF NOVI
THURSDAY, APRIL 13, 2000, AT 7:00 PM
COUNCIL CHAMBERS Ė NOVI CIVIC CENTER Ė 45175 W. TEN MILE ROAD
The Mayor called the meeting to order at 7:11 p.m.
PLEDGE OF ALLEGIANCE
ROLL CALL: Mayor Clark, Mayor ProTem Lorenzo, Council Members Bononi, Crawford (absent/excused), Csordas, DeRoche and Kramer
APPROVAL OF AGENDA
CM-00-04-115 Moved by Kramer, seconded by Lorenzo; CARRIED UNANIMOUSLY: To approve the agenda as amended.
Vote on CM-00-04-115 Yeas: Clark, Bononi, Csordas, DeRoche, Kramer, Lorenzo
Mr. Jim Bacon, Director of Community and Economic Development for Oakland County, offered his thoughts after reviewing the draft policy for tax abatement. He, Mr. Dave Schriver and Ms. Maureen Krause appreciated the thoughtful approach taken on the subject. He continued recognizing tax abatements being additional tools for Novi in controlling the decision making process for new development in the community. His office and the MEDC are two offices identified for first contact points by companies seeking to locate in the Metro area. One of the first questions asked is which communities offer abatements? This is a starting point, the reason, from the Countís experience, because the companies believe their project is significant enough to receive other incentives that are tied to having local tax abatement. One of the most obvious ones is the MEGA-Grant available from MEDC for industrial firms. He was also impressed that the draft has remained true to its original intent; a tool and option to be used at the discretion of the Mayor and Council. The policy draft before Council articulates a set of criteria reflecting the communityís willingness to work with businesses that exceed Noviís high standards for development and will be contributing something of exceptional value to the community. One suggestion about the criteria is Council may want to consider amending the section regarding no more than four abatements being granted in any one year. Drawing on his years of experience he questions if Council wants to limit themselves to a finite number of abatements. There may be a time when a very wonderful business is the fifth business to come before them.
PURPOSE OF SPECIAL MEETING -Tax Abatement Policy
Councilmember Kramer recognized that most concerns expressed at a previous meeting were listened to and included in the draft presented to them. He would like to open a discussion about Mr. Baconís comments regarding the four per year abatements. He questions whether we should specify a number? He notes that the
objective data page has been revised. Is it now slightly on the high side, specifically the 50 to 90 new full time employees? Councilmember Kramer asked Mr. Capote for an explanation of PA178 as amended. Mr. Capote responded the intent is to allow all of the uses permissible under the statue to be petitioned for tax abatement to a local municipality. The IFT comes from the State, any company would have to complete the State paperwork that would accompany the Novi application and the certificate would come from the State. Councilmember Kramer asked if a specific list could be given to Council? Mr. Capote responded it is essentially manufacturing, warehousing, and exposition facilities of 250,000 square feet or greater. Mr. Dennis Watson, City Attorney, added that industrial property is defined to include the following: facilities related to a manufacturing operation, engineering research and development, warehousing or parts distribution facilities, and research and development laboratories. Mr. Capote interjected the OST District prohibits manufacturing to only prototype development. Councilmember Kramer said the tax abatement re-wording is straight and to the point and should not mislead anyone applying for the process.
Councilmember Csordas asked Mr. Capote if the word exceeds in the sentence to promote the preservation of natural resources that exceeds the Cityís requirements of the City of Noviís environmental regulations under Tax Abatement goals, item B, should be in this sentence? Is it correct that Novi has one of the strictest environmental policies around the area? Concerning Item C, the part of the sentence, without creating a high demand for City services and City funded infrastructure improvements, in the past has the City contributed to it? He stated these are both on page one, and would like more explanation. On page two, Item I, he also would like to know about setting a number for tax abatements in a year. Councilmember Csordas would also like an explanation for Item J. Mr. Capote stated the intent is for the company to show a cost disparity between doing business in one location as opposed to another, therefore the need to seek public incentive to locate in Novi. Councilmember Csordas ask that Item J be rewritten for clarity. He continued with page three, he asked for an example about the section stating all other uses as permitted. Councilmember Csordas asked for confirmation that PA 198 included convention centers of 250,000 square feet or more? Mr. Capote concurred. Councilmember Csordas then questioned if the warehousing was to be eliminated? Mr. Capote answered yes. Councilmember Csordas asked what was the point in leaving it in? Mr. Capote answered it is Councilís discretion, at a future date they may decide to let warehousing in for a period of one or two years. Item B on page three, new capital investment, the amount of money for investment, a ten to thirty million investment may be more appropriate. Item C, small companies, his experience with small companies in the United States is the average small company has eighteen employees. His opinion is that fifty to ninety employees is to high, it cuts down on the potential of relocation. A set number is necessary but should be
adjusted. On page one of the attachment, the first line, eligible facilities. Is this an attachment to this policy? Mr. Capote responded it is a cover page on the "boiler plate" application. Councilmember Csordas asked for clarification on Item A, page one, about considerations for tax abatement in the OST District, is it the acreage or the foot print of the building? Mr. Capote answered it is the building foot print of the proposed development. Councilmember Csordas continued, on page two, City of Novi tax abatement application, Item six, why is a speculative building included, and how will they gauge the value? Mr. Capote stated it is permitted in PA198. This can be stricken from the application. Councilmember Csordas asked this to be stricken based on Councilís approval.
Councilmember DeRoche commented the tax abatement policy is very well worded and relatively easy to understand. Mr. Capote gave a brief overview of previous discussions concerning MEGA, Michigan Economic Growth Authority, and how it works with companies locating in Michigan. Councilmember DeRoche asked what interest the State has in businesses remaining in Michigan and attracting new businesses? Mr. Gormanzano answered the interest is in creating job growth and added revenue for the State and Localities for the long term. Councilmember DeRoche asked if the statute stating there must be local participation is open for interpretation? Mr. Gormanzano stated the reference is to the locality, it is a broad definition because in some cases there are townships that are not charter townships which would be referred back to a County for participation or some companies look for support with waterlines or fees that are County related. The philosophy behind the participation is the State cannot handle everything, they like to see partners in the process and secondly the cost differentials are very important, a significant base of the differentials is from property taxes, which can only be alleviated by the municipalities. Councilmember DeRoche then asked if the MEGA Board is the interpreting body? Mr. Gormanzano responded yes, eight people are seated on the board. The CEO is Mr. Doug Rothwell who is appointed by the Governor. The process is negotiated with each locality; it may be tax abatement, personal property tax exemptions, or municipal services. Councilmember DeRoche finds it frustrating that the City of Novi is being asked, by a State Board that we pay taxes to for services received, to abate our local monies that we may not have to give up. Mr. Gormanzano said the State is also a partner in the process, they give up the majority of single business tax revenue and the entire 4.3% of personal income tax for new employees. This usually is significantly more than the local tax abatement. Councilmember DeRoche asked Mr. Capote why businesses are trying to locate in Novi? Mr. Capote responded the location, proximity to Metro Airport, to available Universities (i.e. University of Michigan, Wayne State, Oakland County Community College, and Walsh College), road infrastructure, and along the M-5 connector. Councilmember DeRoche then stated the reasons companies do not want to move to Novi; the developmental process can be time consuming here, tough Wetlands and Woodlands Ordinances, and tough Facade Architectural Ordinances. These concerns add to the cost of doing business in Novi. Councilmember DeRoche asked Mr. Capote how often are property taxes a concern to the companies as opposed to the other Cities they are looking at? Mr. Capote answered he had never heard of property taxes being a concern. Councilmember DeRoche commented on the large companies he does business with always expect extra concessions made because of their size, number of employees, prestige of doing business with them, the sizzle.
The companies want to hear about a concession or abatement made because of how big and important they are, regardless of how small it is to their bottom line. He has heard residents comment these companies should pay a premium to locate on a pre-
constructed freeway system outside of their door, with water and sewer already in place. He continued by stating Novi is considering granting abatements in areas that can now be developed only because of prior public funding. Some businesses will apply for abatements because they are required to do so to obtain the MEGA Grant. His opinion is if the City can run a balanced budget for the term of abatement, than the remaining taxpayers must be overpaying on their taxes. He recommends the City consider handling the abatements on an individual basis, with no policy or obligation and the City draft a resolution protesting the policy of the MEGA Board that the local municipality abate to satisfy statutory participation requirements.
Councilmember Bononi stated she is disappointed that Councilís comments were not included in the draft document currently presented to them and the State participants have not been given the opportunity to see Councilís comments regarding the draft. She is very concerned with many of the items listed on the criteria for consideration many are based on presumptions. One being the companies utilizing the abatement would stay in the State of Michigan, no one can know for sure. Novi has a finite amount of land and blessed with the location that would attract companies interested in OST. She stated the document is not particular enough, there is only a narrow criterion that should be considered. Councilmember Bononi also stated four abatements in a year are too many. She is also concerned with companies coming in with empty promises, and what long and short term impacts the company will have on the community. She would like the companies to prove they are not looking for just a free ride in the community. Councilmember Bononi does not see any benefits for the community in giving companies tax abatements. She also stated she would not be interested in a company who would be looking for the City to provide any additional infrastructure, or wetland mitigation. Also she would like the applicant to define the "break even point" of jobs created compared to the tax break. Councilmember Bononi is also looking for a yearly compliance review of companies receiving the abatements.
Mayor Pro-Tem Lorenzo supports and agrees with the last two speakers. Philosophically she agrees with Councilmember DeRoche, but she feels it is Councilís responsibility whether they create a policy and work with MEGA or not. It appears that many Councilmembers are willing to create an abatement policy; she would like to fine-tune the document with as restrictive and selective criteria as possible. The draft document before them is an improvement over the first draft but still needs improvement. Her major concern is adding a threshold limit of forty million dollars, five hundred jobs and eligible for a MEGA and at least ten million dollars, one hundred twenty-five jobs, and participation with MEGA or other funding sources for rehabilitation and expansion facilities. Mayor Pro-Tem Lorenzo further stated the document is the City of Noviís and should be what the City needs and wants. A few points to be changed in the draft document are the thresholds; they should be raised, not lowered. Also in response to Councilmember Csordas comments, page 1 Item A, tax abatements should not include any City funded infrastructure. All projects have to comply with the Ordinances, if a statement is included in the tax abatement goals, it should be in excess of what the City requires. Item number D, Promoting Capital
Investments, should be in the form of Hi-Tech Research and clean manufacturing uses. Item E, she would like to see a statement "to create or retain a significant number of high wage employment opportunities in the community" but would accept "to create or retain a significant number of employment opportunities within the community that offer competitive wages within the industry." Mayor Pro-Tem Lorenzo offered other possible criteria in question form from a document titled "Industrial Facility, Taxes, Corporate Welfare or Business Incentives" in the Planning and Zoning News, dated March 1997. Is the loss of potential new taxes going to negatively impact the community, schools, police, fire, library, parks and the like? Is the applicant a major corporation with a track record of financial stability? Will this be a world headquarters for the company? What kind and types of jobs will the companies bring to the community and will they offer competitive wages within their industry? Will the companies presence result in other companies relocating in the community and is the community prepared for this effect? Is the company committed to the community for the entire term of the tax abatement and into the future without any further tax abatement requests? Mayor Pro-Tem Lorenzo said that before she supports a policy document, the several items mentioned need to be addressed. She also reiterated Councilmember Bononiís comments that City Council has the final approval or denial, and with conditions.
Her suggested mantra for the meetings discussing the tax abatement, past and future is selective, cautious and disciplined.
Mayor Clark commented Council is here to continue the discussion whether Novi will have a policy of tax abatements. His opinion is tax abatement is a misnomer, to abate is eliminate to terminate and do away with. What Council is really discussing is a policy of tax deferrals, but not all taxes for all times. Many people, residents and workers, feel this is an outstanding community, but the economic reality is we compete worldwide and the competition is fierce. Mayor Clark responded to one of Mayor Pro-Tem Lorenzoís comments regarding loss of taxes impacting the community. Mayor Clark does not believe it is a loss of taxes. He has been asked by Councilmembers and residents why businesses are moving into South Lyon and Wixom and bypassing Novi? It is because they are giving the businesses a competitive advantage. The fact is Novi is not being aggressively competitive in marketing the community. In response to this, Novi created an OST District. Businesses have been looking and taking advantage of this district without tax abatements. Mayor Clark feels this trend will continue therefore no tax loss. If the City were to offer tax abatements, there will be a substantial amount of new revenue. It is coming at a time when residents are telling the City to do something about the roads, and traffic without raising property taxes. Being there is no magic wand, Council needs to look for other sources of revenue. In response to the question, how will we know the company is committed for the long term? He believes companies will not put a significant capital investment into a community, then pick up and leave after the abatement expires. There were comments about businesses considering asking for tax abatement moving in the M-5 corridor taking advantage of pre-constructed freeways. Everyone funds freeways and county roads with tax dollars; he does not believe that the Novi residents have funded too many freeways. The companies moving into Novi will be funding their share of road and traffic improvements. He also pointed out if there is a policy in place with a limited number
of abatements available, that does not mean you have to issue any in a given year; they are available if you choose to grant an abatement. He suggested a limited number of abatements in a given year. If none are given they will not carry over into the next year. Regarding wages, we are speaking of companies involved in research
and development or others listed in Act 198; these are typically beyond minimum wage. These usually are engineers, scientists, and research people, which may have a positive impact on the residential component of the City. It will ultimately benefit the City to diversify the tax base and make the community stronger.
Mayor Clark then asked Council if they wished to consider a motion or to direct Mr. Capote to fine-tune the document for consideration at the April 17, 2000 meeting?
Councilmember Csordas concurred with all of the Mayorís statements. His opinion is that it is Councilís fiscal responsibility to the citizens and in their best interest to authorize the policy of abatement. Council needs to do what they can to shift the burden of taxation from the homeowners to the commercial residents to insure the success of the Cityís future. He has had opportunities to attend functions in Lansing, only to see how aggressive our neighboring Cities are in attracting hi-quality development. Now is the time to secure Noviís future; the incredible economy will not last. Councilmember Csordas agrees with the Mayorís comments on four abatements per year.
CM-00-04-116 Moved by Csordas, seconded by Kramer; CARRIED UNANIMOUSLY: To request Mr. Capote to revise the Draft Tax Abatement Policy from comments given by Council.
Councilmember Bononi disagreed with Mayor Clarkís definition of taxes being deferred; to her something deferred leaves an opportunity to be recovered. She feels the tax money is not deferred, the money is gone. She is also concerned about the benefit and who the beneficiaries will be plus the percentages of the benefit. She has spoken to many residents in the community and not one has been in favor of a Tax Abatement Policy.
Mayor Clark commented on the question of other benefits an applicant may seek from the City of Novi during the abatement process. He is in favor of informing the company the abatement is the only benefit from the City they will receive. He also stated Council could determine the terms of the abatement.
Councilmember DeRoche commented the Mayor gave good reasons why the abatement policy should be considered and he agrees with some of the reasons. He further stated he feels a business being abated should be increasing the business of everyone around them and therefore the tax revenues of everyone around them.
Councilmember Csordas commented he thinks this is a fifty-percent tax base increase, not loss. He also wanted to amend the motion to ask Mr. Capote to also indicate the revision number of the document brought to Council, and underscore the revised or added language.
Councilmember Kramer commented the policy is close to being finished. He only requires good solid, substantial criteria. He suggested looking at the individual proposals and see if they fit criteria rather than a specification. He is looking for a beneficial total; the criteria are used to make this judgement. He continued that Novi has grown up and we have set ourselves up to "play" in the world of bigger business. We need a policy, businesses will be asking for one. The City needs to look for corporations that will be good City citizens and to help balance the residential tax burden.
Mayor Pro-Tem Lorenzo does not agree with the statement "fifty-percent of something is better than one hundred-percent of nothing". This is making a large assumption that another company would not be locating in the area. We have a map showing many companies locating in the OST District without any tax abatements or other incentives. The residents she has heard from state they want a policy similar to the City of Troyís.
Mr. Watson was asked if it was legal to add another item to the April 17th Agenda, which has been published. He stated the revised tax abatement policy could be added to the Agenda.
Mayor Clark asked if it were acceptable to Council to add the item to the April 17th Agenda for discussion and May 1st as an action item?
Mayor Pro-Tem Lorenzo stated she preferred the item to appear on May 1st. The public needs to be made aware Council is going to discuss the tax abatements.
Mayor Clark asked if the addition could be indicated on Cable Television?
Mr. Watson answered it can be added if the agenda can be changed on Cable Television.
Councilmember Bononi agreed the item is important enough of an issue that the public needs to be notified, she is in favor of the May 1st Agenda.
Councilmember Kramer and DeRoche felt there is benefit to placing it on the April 17th Agenda for discussion, but not action.
Councilmember Bononi asked if adding another item on April 17th would overload the agenda?
Mayor Clark responded it did not appear to be so.
Vote on CM-00-04-116 Yeas: Clark, Bononi, Csordas, DeRoche, Kramer
Mr. Wilson stated his opposition to the tax abatement policy. He feels it is discriminatory and morally wrong to give some companies a tax break and others none.
Ms. Lareta Roder, 25910 Clark Street, also is against tax abatement.
Miss Toni Nagy, 22647 Cranbrooke, said the tax abatement policy was discussed at their Homeowners Association meeting. Most were against the policy. If there had to be a policy, it should be very restrictive. Other concerns she was asked to bring forth by the residents of Village Oaks were they did not feel they were being provided with many city services. They are also concerned with the budget being balanced.
Mr. Greg Kirman, Eight-Mile and West Ridge Downs, expressed his disappointment in not being given a copy of the tax abatement policy document. He had questions whether the firms asking for tax abatements would be good neighbors. Mr. Kirman also felt the Mayorís comment of not giving companiesí "one iota more" needs to be spelled out in the tax abatement policy for future City Councils.
Mayor Clark told Mr. Kirman that he means what he says and lives by what he says. He further stated that all of the Councilmembers live in Novi and pay taxes and have had the same increases in the last twenty years. They do not like it any more than the people in the audience do. Mayor Clark confirmed there would be a balanced budget. Cuts will be made wherever necessary to do this. He wanted to remind the audience that the City does not have any control over many of the tax increases. If they will note the amount being collected for schools, the County taxes, and Oakland County Community College they will also see that the City has been operating on 4.3 mils. He stated they do and will listen; all Councilmembers are mindful of who they serve.
CM-00-04-117 Moved by Lorenzo, seconded by Kramer; CARRIED UNANIMOUSLY: To adjourn the meeting at 9:30 P.M.
Vote on CM-00-04-117 Yeas: Clark, Bononi, Csordas, DeRoche, Kramer, Lorenzo
Richard J. Clark, Mayor Nancy Reutter, Deputy City Clerk
Transcribed by: ______________________________
Susan E. Blumer
Date Approved: May 15, 2000