Saline is open for business.
Or, it’s better to grant a tax break for a company that eliminates 1,200 jobs but still employs 1,100 workers than it is to have an empty 1.5 million-square foot facility.
Those were the opinions that carried the day as Saline City Council voted 6-1 to transfer and extend three ACH tax abatements to its successor, Faurecia.
Faurecia requested to transfer and extend existing tax breaks on $103 million of investments. The tax breaks, originally granted to ACH between 2006 and 2008, were set to expire this year. Council also chose to extend the tax breaks. One expires in 2018 and two expire in 2020.
The Faurecia request was one of three passed by city council. Council unanimously approved Klingelnberg-Oerklikon Tec Center’s application to transfer the location of its tax abatement from its old Woodland Drive location to a new location at 115 E. Henry St., in the old Sun Engineering building. Council approved a new tax abatement for Kunststoff-Technik Scherer & Trier USA, Inc.
During a public hearing on the Faurecia request, Ann Arbor SPARK Vice President Luke Bonner told council that most communities would be thrilled to have this level of foreign investment.
“It’s an extremely enviable position, of any community across the state, to have the amount of foreign investment that was discussed by city council tonight. It’s definitely a good opportunity for the community,” Bonner said.
Bonner reminded city council that Visteon formed ACH to sell or close 23 facilities, including Saline plant.
“We see a tremendous opportunity with this project, considering the alternative could be closure by ACH. And nobody wants that,” Bonner said. “Faurecia is one of the top Tier 1 automotive suppliers in the world and growing.”
Bonner said Ford and Faurecia leaders have expressed optimism about growing the Saline operation. He said granting the abatements would signal to France that Saline is eager to build a relationship.
Brian Marl, who reviewed the applications previously as chair of city’s Special Projects Commission, enthusiastically endorsed the application.
“I couldn’t agree with our friends from Ann Arbor Spark more. This is an important investment, and although far from perfect, I appreciate what (Bonner) said about the alternative -- the alternative may well be an empty facility, which would be absolutely devastating to this community,” Marl said.”So I think that approval of these three agenda items sends a strong message to France that Saline is open for business.”
While city council granted Faurecia’s request, it came with questions. Tax break applications are granted based on a score. One of the major ways to get points is to add jobs or protect jobs. Faurecia, which currently employs 1,735 workers, is reducing its workforce to 1,100. Only a year ago, ACH employed 2,300 workers at the facility. United Auto Workers union members have also agreed to major concessions. Line workers now start at $11 an hour.
Council member Dean Girbach wanted to know how the application was being scored with the job reductions. City Manager Todd Campbell said he couldn’t answer that question specifically because this wasn’t an application for a new abatement, but an application for a transfer.
“Historically, original job numbers have not been part of the equation with transfers,” Campbell said.
Council member Jim Roth questioned whether all the personal property items listed in the original ACH applications were still being used by Faurecia. He was told the lists are maintained largely on the honor system. Roth was the lone council member to vote against the Faurecia tax break.
Another question was raised about the tax abatement on real property. Faurecia has said it plans to use about 50 percent of the facility, which is still owned by ACH.
With many questions about the application, Roth suggested having a work session to work through it. Campbell said it was important that city council move on the issue Monday night to assure the applications were accepted by the Michigan State Tax Commission for this year.
Girbach, too, said he was hesitant to grant a tax break for a company that was shipping 600 jobs down the road (to Detroit Manufacturing Systems, a start up that Faurecia is involved in). He asked for some assurance that Faurecia planned to grow in Saline.
Dave Borysiak, Tax Director for Faurecia, told city council that the facility was losing $4 million a month when ACH began looking for a buyer five years ago.
“That’s not sustainable for Ford, Faurecia or anybody. So when we negotiated for the business, we couldn’t lose that money. We hope to make half as much as they lost each month,” he said.
Part of the turnaround, Borysiak said, was renegotiating for much lower labor costs with the UAW Local 892.
“We would not invest $150 million in this business if we did not plan on being here long term,” Borysiak told council.
Girbach noted that ACH spent $100 million on the facility before selling it.
Council member David Rhoads said there weren’t any guarantees about business anymore, if there ever were. Though opposed to the idea of tax abatements, he said the city needed to use them or risk losing business to other communities.
“I am happy Faurecia came in and took over the facility and made the investment in the community to retain a fair number of jobs,” Rhoads said. “I smile every time a drive by the parking lot and see it full of cars.”
Mayor Gretchen Driskell agreed.
“It was frustrating for this council and communality to have that 1.5 million square-foot facility in question. We sat in these seats, wondering and waiting to see if the plant would be bought. At one point, employment was as low as 700 and the parking lot was empty. We were all worried,” Driskell said. “We changed how we did business in the community and made major cuts to our budget. As stated by SPARK, we’re fortunate to have the investment in our community.”