Although it’s been three months since Dicastal Logistics Group employees began working in their new Hagar Township distribution center, there’s still plenty of work to be done.

Referring to the warehouse as “new” would only be half appropriate. While the building is new to the company and its employees, the 430,000-square-foot structure has been vacant for 2 1/2 years.

Built in the 1960s, it was once home to APL Logistics until the company shuttered its doors in early 2016. The closure was a big hit to the township, costing the area 50 jobs.

Things changed when Dicastal bought the building with the promise of bringing in 100 jobs.

The company, based in Canton, Mich., opted to open a second location this year and chose Southwest Michigan due to its proximity to the CSX Transportation railroad, a production plant in Greenville, and as a direct link to the automotive makers the company works with.

Another factor that went into Dicastal choosing Hagar Township was a 12-year industrial facilities tax abatement the company received. The industrial tax exemption, also known as an IFT, will allow Dicastal to avoid paying half of the property taxes on any new equipment and renovations.

“We sought the abatement because there were a lot of renovations that needed to be done,” said Don Ingersoll, operations manager for the Hagar Township warehouse. “It was going to cost us some capital. We wanted to make sure we were making a smart business decision.”

An industrial tax abatement reduces property taxes on new investment for eligible companies.

The abatement operates as an incentive to seduce a business, typically industrial, into expanding existing plants or building new ones, with the idea that investment creates and retains jobs.

Some abatement agreements require the company to hire a set number of employees in addition to investing so much money.

In 2018, Berrien County municipalities have 130 ongoing abatements.

As a result, municipalities are not capturing the full amount of taxes possible from those businesses. However, government officials argue this is a narrow viewpoint.

Benton Township Superintendent Kelli Smith said that without abatements, a community might not see additional tax dollars.

“This is used to encourage additional investment in the township,” Smith said. “We acknowledge they have a choice to be somewhere else. In return to their commitment to our community, we are willing to give them that 50 percent abatement. In 12 years, that value on the real property is still going to be there.”

Compared to other Berrien communities, Benton Township is near the top in number of abatements approved in the past five years. This isn’t unexpected considering the high volume of industrial and manufacturing companies that call the township home.

In the past five years, Benton Township has had seven applications and approved all seven IFTs. Those include Great Lakes Farmers Distribution (received two IFTs), South Shore Tool & Die (also received two IFTs), Special-Lite, Gast Manufacturing and Whirlpool Corp.

Companies can receive an abatement for up to 12 years. Each specific agreement involving the length, investment amount and any other requirements – such as job creation or minimum wage – is decided on a case-by-case basis between the company and the municipality granting the abatement.

The tax exemption is only applied to new property bought or expanded on, not already standing equipment and property.

Most abatements can reduce property taxes up to 50 percent for up to 12 years. Some abatements can reduce property taxes up to 100 percent. After the 12 years are up, some companies can apply for extensions.

The caveat for businesses is they don’t receive an abatement or credit unless they fulfill that investment.

Some municipalities offer these abatements to stay competitive with larger markets.

If a certain city offers tax abatements and a township, village or city next door does not, a company would more likely choose to grow or develop in the city that offers tax abatements because it is beneficial for that company.

A busy year

Dicastal wasn’t the only abatement approved by Hagar Township in the past year.

Monte Package Co. began expanding its headquarters after township trustees approved a tax abatement for the company in November 2017.

The family-owned company is adding 3,600 square feet to its shipping and receiving area in its warehouse facility to accommodate increased production. Cornerstone Alliance, an economic development organization based in Benton Harbor, worked with the company on securing the abatement.

Monte Packaging is investing $140,000 in the project, which will create two jobs in the process.

The Coloma/St. Joseph Kampgrounds of America in Hagar Township was in need of $600,000 in renovations after a couple bought the 40-acre property in 2017.

Trustees approved a commercial tax abatement at a June 2018 meeting. The exemption freezes the current taxable value of the property for 10 years, which will include major upgrades to plumbing, electric, water and sewer infrastructure, as well as the rehabilitation of the clubhouse, restrooms and pool.

Township Supervisor Izzy DiMaggio said it’s a bit unusual for that many abatements to be awarded in a 12-month period. But, DiMaggio argued, the actions taken by the board shows potential and current businesses that the township supports business.

“We want to do anything we can do to make them stay and grow,” DiMaggio said. “It goes to show Hagar Township is a great community to expand in. Our tax base is very low.”

DiMaggio said Cornerstone Alliance proved to be helpful in all three instances where an abatement was granted.

Cathy Tilley, business development manager with Cornerstone Alliance, has helped facilitate dozens of businesses in securing abatements over the years.

Prior to holding a public hearing and voting whether to approve a tax abatement, boards and commissions must first establish an industrial or commercial development district. Tilley said the addition of the districts are mandated by the state.

“Most of the municipalities are pro-business and grant 12 years,” Tilley said. “It’s a win-win.”

From the business standpoint, Tilley said the majority of companies save at least 50 percent on property taxes. Any type of savings gained from an expansion can be transferred into its operations to increase sales and production.

From the community’s perspective, she said the tax abatement comes with further investment and more jobs. More jobs means more people come to the community.

“It’s an excellent tool the state of Michigan provides as an incentive,” DiMaggio added. “If (Dicastal) never came in, we would be in a good financial state. But taking over a 430,000-square-foot building, that’s a big win for us. There are taxes being paid and jobs being created that weren’t there before.”

A taxing effort

In some instances, companies have shuttered their doors years after getting an abatement. Thus, the community is never able to retrieve 100 percent of the property taxes at the end of the abatement.

Modar Inc., a former specialty fixtures and furnishings company, is an example of that.

After Benton Township gave the company an abatement in 2012, Modar closed three years later.

Luckily, Special-Lite, a Decatur-based door-making company, invested about $1 million on Modar’s vacant building. The more than $1 million investment accounts for not only the price of the building, but the costs attributed to the plant’s equipment.

Township trustees voted to end the 12-year tax abatement that Modar technically still held. Revoking the tax abatement was meant as a house-cleaning item, after Special-Lite chose to apply for a tax abatement of its own.

With plants in Decatur, Niles and Arkansas, Special-Lite is using the Benton Township site for manufacturing operations. The decision came after the company outgrew its Niles plant.

A few months after Special-Lite began production in the township, the company secured its 12-year tax abatement from the township. The abatement was granted for ongoing and upcoming renovations.

Smith said abatements can be awarded for projects that have already begun construction as long as the work started within a six-month window.

“It’s interesting to me that they can start their project prior to requesting the abatement,” Smith said. “We don’t look at it as a loss of leverage. We still want them to continue to grow here and invest.”

It’s not a complicated process securing a tax abatement, but Smith said it’s not a guarantee either. While the township regularly awards 12-year abatements, Smith said township administrators are in the process of creating a certain criteria for the length of the abatement.

Among the conditions that would be included under a maximum abatement would include job creation, Smith said.

“We will be looking at our IFT policy to see what amount of investment and amount of jobs created would make sense for what businesses get.”

In the past, Southwest Michigan residents have expressed concerns with abatements because, as homeowners, they don’t receive the same breaks.

“Residents might take issue (with abatements). There is that misunderstanding of ‘why don’t we get that too?’” Smith said. “While businesses can only apply for them, it’s not solely a benefit to a manufacturing facility. It’s a benefit to the community as a whole.”

Big companies, big investment

Whirlpool has several buildings in Benton Township, Benton Harbor and St. Joseph that have received IFTs over the years.

Among the recent projects the appliance maker secured abatements for was a day care facility near its global headquarters, the Riverview Campus in downtown Benton Harbor and an expansion of the St. Joseph Technology Center.

The Tech Center employs 700 people. No jobs were created as a result of the expansion, but Whirlpool officials explained updated facilities are necessary to retain and recruit top talent. 

Whirlpool officials had previously said the project would not have gone forward without a tax abatement.

Jeff Noel, vice president of communications for Whirlpool, said the appliance maker made a 40-year investment in the Benton Harbor community when it built the Riverview Campus.

“The decision on where to make an investment on brick-and-mortar improvements is a combination of a lot of things,” he said. “When communities use abatements in a smart way and companies choose to improve in a smart way, it becomes a win-win-win for the community, the company and the employees.”

Noel said the abatement wasn’t the defining factor that went into moving forward with the Riverview Campus project.

He said Whirlpool officials wanted to know there was support from the community. With more than 1,000 employees now stationed there, Noel said they looked at several scenarios.

“You have to look at all your options when you make an $86 million investment,” Noel said. “This is not a giveaway. An abatement, if done right, is an opportunity to gain more revenue and spur economic development. Folks who say we’ve given up something, that’s a glass-half-empty point of view.”

More room to grow

Dicastal isn’t stopping at expanding in Hagar Township.

Ingersoll said they are opening a third location in early December – a warehouse in Marysville, Ind.

But again, there’s still more work to be done in Hagar Township. Used as aluminum alloy wheel storage distribution and repackaging center, Ingersoll said they’ve been shipping to Toyota and Honda, with plans to begin work with Chrysler and Ford.

The distribution center now has 20 people working there, but Ingersoll said they will reach 60 to 80 employees – with upwards of 100 – within the next three to six months.

The building itself was unoccupied for 2 1/2 years, which Ingersoll said led to Mother Nature finding a way to abuse it.

Dicastal has already completed roof repairs and fixed drainage problems. They’ve since hired a contractor to extend the dock height on one side because some of the material is too large to fit and requires workers to unload on the other side of the building.

“We’ll continue to grow that second shift,” Ingersoll said. “There’s kind of a transition right now. But there’s still more growth to be had here.”

Contact: twittkowski@TheHP.com, 932-0358, Twitter: @TonyWittkowski