Proactive measure a model for communities in lakes area

Wixom isn’t the only community in the lakes area that offers potential commercial investors tax abatements as a carrot to start up or expand their operations, but they’re the only one we’re aware of that is actively showing the businesses that do receive the tax breaks the stick that they wield if the terms of the abatement aren’t met to the city’s liking. We’re pleased city officials are taking this step towards enforcement of the stipulations set forth in the tax abatements the city has issued, and we urge other communities offering tax breaks to spur development to take Wixom’s lead in ensuring compliance with what those communities’ governing bodies had in mind when they approved the abatements in the first place.

Since the city doles out a significant number of tax abatements each year, Assistant City Manager Tony Nowicki and Assessing Clerk Debe Barker will begin making the rounds to businesses this summer to ensure that those companies are in compliance with their tax abatement agreements.

Nowicki said the city is looking to make sure that, since the city has invested in the companies by granting them tax breaks, the terms of the agreements are honored.

In addition, city officials are using this opportunity to conduct some outreach to local businesses, including offering assistance or asking if they would be interesting in partnering with the city for civic projects, community events, the Wixom Foundation, or local school districts’ efforts, Nowicki said.

In the last 20 years, the city has issued 16 tax abatements; a dozen of those are still active, each of which earn a 50-percent abatement.

The top criteria for awarding tax abatements include the amount of the local investment by a company and the number of Wixom jobs created. Each company is obligated to submit annual status reports to the city by Jan. 31 of each year indicating the number of employees hired.

If the number of jobs created falls short of what was agreed to when the company first received the tax abatement, the company is expected to pay the city an amount equal to the tax deferment; if hiring goals and milestones are not met, the city could revoke the tax abatement.

Tax abatements are laudable efforts in a depressed economy. If done properly and closely monitored for clear progress, the breaks can serve as a strong incentive for a business looking to relocate or open up to choose a particular community. Particularly in a sluggish Michigan economy that has ravaged small businesses in recent years, what prospective commercial enterprise would pass up a reduced property tax rate? Not many, logic dictates. But that’s only part of the equation.

All too often, we suspect, communities in the lakes area dole out the tax breaks to lure businesses in but don’t do their proper due diligence in following up to make sure the terms of the agreement are met. That, in effect, is like throwing money away. If a business receives a tax abatement — essentially siphoning some funds that the community may otherwise receive from their coffers, which have already been depleted due to declining property tax revenues — and doesn’t follow through on their end of the bargain, municipalities are effectively shirking their responsibilities to their residents to be stewards of taxpayer dollars.

And our impression is that such occurrences happen more often than most would care to know about. That’s what makes it particularly refreshing to learn that Wixom officials are taking the bull by the horns and going around to the businesses that received the tax abatements and essentially getting status reports on how they are coming along with fulfilling their responsibilities to the community that put out a mat figuratively saying, “Welcome to Wixom. Here’s a tax break.”

But we hope it doesn’t stop in Wixom. All lakes area communities that offer tax abatements to incoming businesses or existing businesses looking to expand should be similarly proactive in ensuring that the jobs that elected and appointed officials were promised are being created, and that the investment in the community that was promised is actually being delivered.

We don’t suspect that communities are actively allowing the tax abatements to become a one-sided arrangement in which a company receives the tax reduction and the community effectively gets short-changed on their agreement. But without actively checking in or requiring written documentation of job creation and/or investment, how will community officials ever truly know the fruits of the abatement itself?

So it stands to reason that lakes area communities that are currently offering abatements — and several in the lakes area don’t — should follow Wixom’s lead and take similar proactive measures to ensure that the tax dollars sacrificed are actually doing some good. It makes no sense, particularly when revenues are scarce, to give something and get little or nothing in return.