Proper Group International Receives First Tool and Die Tax Break in SE Michigan City
While it still needs to be blessed by the state, a company formerly known as Proper Mold & Engineering (Warren, Mich.) is the first in the longtime manufacturing-heavy city to be granted tax abatements.
A Warren company that relied fully on the auto industry for many years before diversifying may become the first in the city to receive a sweeping tax break created for tool and die firms.
City officials are recommending that a state agency approve the tax abatement for Proper Group International for five years — the minimum term permitted under a Michigan law aimed at helping the ailing tool and die industry.
The company, located on 11 Mile Road and formerly known as Proper Mold & Engineering, hopes to expand into the areas of alternative energy technology, the defense industry, commercial aerospace and electric vehicles.
“It’s difficult to make the move from being a pure auto supplier and move into those areas of expertise,” Chief Financial Officer Mark Rusch said.
Unlike the more common tax incentives for industrial firms, the 1996 law permitting Tool and Die Renaissance Recovery Zones does not require companies to construct or expand buildings, buy machinery and equipment, or hire new employees. However, they must join a collaborative of other tool and die firms and demonstrate how participation will improve a firm’s financial strength and make it more competitive by working in the group.
To qualify for a state review of a renaissance recovery zone tax break application, a company first must receive support from the local legislative body.
Proper Group International requested support for a 14-year tax break from Warren, but cautious City Council members voted unanimously to endorse a five-year abatement. If the five-year term is approved by the Michigan Strategic Fund Board, Proper Mold would save 3,440 in city taxes alone, according to figures compiled by Warren officials.
Under the law, taxes can be abated for any term between five and 15 years. The tax breaks are phased out in quarterly increments over the final three years.
Waived taxes include the Michigan Business Tax, the state education tax, property taxes and the local income tax. Special assessment districts and sinking fund millages remain in effect.
The Michigan Treasury Department reimburses local school districts, intermediate school districts and community colleges, but not the tax revenue lost to other taxing units such as local and county governments.
The law allows up to 35 tool and die recovery zones across the state, and each must have between four and 20 companies in the consortium. Twenty-eight zones have been established thus far.
More than 30 companies in Macomb County belong to a collaborative.
Proper Group International began as Proper Mold & Engineering, founded in 1971 in Roseville. The company moved to a 42,000-square-foot manufacturing facility in Warren in 1987 and then nearly doubled its space in 1992. Six years later, a 32,000-square-foot engineering and technical center was built.
Like other tool and die firms that have managed to survive, the company has seen many of its customers and competitors go out of business, largely due to foreign competition and as automakers increasingly sent work oversees. Proper Group has million in sales in 2008, but revenue plunged to million last year, according to documents submitted to city officials. Additionally, many banks are refusing to loan money to the tool and die industry, Proper Mold officials said.
At one point, the firm had 275 employees; today manpower is just over 200.
Rusch said the company hopes to boost staffing. However, with many firms folding and tool and die workers leaving Michigan to search for jobs, Rusch said, “It’s very difficult for us to find qualified people in tool and die, even though we pay a very good average wage and we have very good working conditions.”
“We have had discussions with a major European company with over billion in sales to bring their proprietary technology to Warren,” he said.
Cynthia LaGrow, a consultant to Proper Group, said some tool and die companies are reluctant to reveal operational secrets or identify customers.
“Some companies are a bit hesitant to get involved,” she said.
Meantime, council members have postponed a decision on guidelines for handling future Tool and Die Renaissance Recovery Zone tax break requests.
City administrators have recommended that the tax relief be limited to five years, but that companies could re-apply for extensions.
“We’d like to proceed with caution,” said Gina Cavaliere, director of community, economic and downtown development.
(Macomb Daily – Norb Franz)
