02/09/2003
They aren't only factor, but are key, companies say
By Francis X. Donnelly / The Detroit News
Government tax breaks have become a common, but not always decisive, factor in business decisions, according to interviews with Metro Detroit companies that have received state tax abatements.
A technology company that moved a regional office from Ohio to Michigan after receiving a tax abatement said the tax break wasn't a critical factor in the decision to relocate. Advanced Technology Services, of Peoria, Ill., said a more important reason was that several of the company's manufacturing clients are based here.
"It was of medium importance," company vice president Jeff Owens said. "We were not doing it just for the tax abatement."
Asked if the company would have come to Michigan without the tax break, he said, "I would say we would not have. That kind of pushed it over."
After receiving the $997,000 tax abatement in December, Advanced Technology began relocating its office from Medina, Ohio, south of Cleveland. The company began leasing 30,000 square feet in Livonia two months ago.
It had 10 workers before the move and plans to add 75 to 130 more. Thus far, it has added 40 employees.
Among the other states considered by the company before picking Michigan was South Carolina, which has a lower cost of doing business, Owens said.
When Delphi Automotive Systems was getting ready to consolidate some of its operations in 2000, the auto parts supplier decided to expand its facility in Troy rather than in Ohio after receiving a tax abatement from Michigan.
Richard Zablocki, Delphi's general director of tax administration, didn't rule out that the company would have selected Michigan without the tax break. "I can't say," he said. "We didn't need to make that decision.
"I won't tell you it's the most important factor," he said about the tax break. "It was one of many factors we looked at."
The company received a $24 million tax break over a 15-year period. It was required to create 525 jobs over 10 years.
Flagstar Bank said it considered building a new corporate headquarters in Florida or Texas before deciding on Troy in 1999. At the time, it had outgrown the three buildings it was leasing in Bloomfield Hills and Bingham Farms.
Michael Carrie, the company's executive director, said he doesn't know whether the company would have remained in Michigan without a $20.6 million tax break from the state.
"It wasn't to that point," he said. "But that was the swaying factor that made us change our mind and stay here."
He said southern states were attractive because the cost of doing business there was cheaper than in Michigan. The tax abatement helped make a decision to stay here more attractive, he said.
"As far as businesses, yeah, businesses love it," he said about the tax breaks.
The company, which had 2,000 workers in 2000, now has 4,110, company officials said. The number of employees at its headquarters has risen from 900 to 1,800 during that period.
Budco Inc., a marketing services company, was spread all over Detroit when it was looking to centralize its operations in 1997. It was talking to officials in Toledo, Ohio, about moving there but later settled upon Highland Park, where it built a 350,000-square-foot facility for its headquarters.
Dave Mason, the firm's chief financial officer, said the tax abatement was a critical factor in remaining in Michigan. He said such tax breaks are vitally important for small companies trying to compete against larger ones.
"Companies like Budco don't have the same access to capital or resources that larger corporations do," he said.
The company, which has 409 workers at the time of the abatement, was required to add 75 people within 18 months. It did so, adding 400 employees over three years.
He said the tax abatement has allowed the company to make significant improvements to Highland Park.
"I don't think many companies have chosen to do that," he said. "We've done a good job of it, bringing business opportunities to Highland Park."