Officials from Nestle were at Marysville City Council’s work session Monday night, held at the city’s water treatment plant on Raymond Road. City Manager Terry Emery, seated, listens as, from left, Kristine Ernst, Sean Cotter and Judith Arfsten, all with Nestle, discuss the relationship between the city and the company.
(Journal-Tribune photo by Mac Cordell)
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City officials are saying the structure of a tax agreement to keep Nestle in town was the company’s idea, not a shift in city philosophy.
At its work session Monday, Marysville City Council heard the first reading of legislation to issue a Municipal Income Tax Credit (MITC) to Nestle in exchange for the company keeping 150 jobs in Marysville, creating 200 new jobs in town and investing an expected $30 million into its local facility.
“We saw that as a total win-win in this particular project,” City Manager Terry Emery said.
At the meeting, Union County Economic Development Director Eric Phillips explained the Municipal Income Tax Credit. He said the city rebates a portion of employee income tax withholding if the company hits annual, agreed upon job, payroll and investment targets.
Phillips said Nestle has agreed to retain at least 155 employees and $18 million in annual payroll in Marysville, to bring at least 200 new employees and $14.3 million in annual payroll to the community and invest an estimated $30 million in real and personal property.
If Nestle hits 80% of the targets each year, the city will credit 75% of the income taxes collected for the new employees to the company’s corporate income tax payment.
Emery said the idea of a credit is not a shift in city philosophy; in fact it was Nestle’s idea.
“We were very comfortable initiating these discussions once we learned they were interested,” Emery said.
He said that because the project involves an existing local company that wants to bring jobs back to an existing facility that doesn’t need infrastructure improvements, the credit made more sense to company leaders than a traditional tax abatement or tax increment financing agreement.
He said the proposed agreement could be a corporate response to local sentiment.
“They are in the community,” Emery said. “They have probably seen some of the thoughts and views on some of the other incentives.”
Phillips said the city has offered MITC agreements in the past for Scotts, Univenture, Goodyear (Continental) and Moriroku Technology North America.
He said the income tax agreements are “one of many different incentives that are necessary for our community to remain competitive to attract jobs, payroll and investment.”
“We have seen the use of tax credits as a positive way to go as long as we can work together with them,” Emery said.
He said that unlike the other incentives, “the impact is to the city.”
Phillips agreed that MITC agreements do not divert tax money away from the schools or other property tax funded entities. He added that qualifying projects do not bring students into the district and in fact require the company to make investments that will increase property tax valuations for the school.
Emery said the city will consider MITCs as well as property tax based incentives in the future.
“A lot of that has to do with the interest of the company,” Emery said.
Phillips said that according to the city’s economic development plan, income tax credits can be offered for companies that meet at least three of seven requirements including that the project creates or retains more than 100 jobs; invests more than $5,000,000; has an average payroll of more than $65,000 per employee; has a total payroll for created or retained jobs of at least $5,000,000; is an industrial or office development; will result in retention of an existing business and/or jobs; or the use “has been identified in the Economic Development Strategy as a use that should be targeted for expansion in the county.”
Officials estimate the credits will total about $916,000 to Nestle over the seven-year life of the agreement. The city will continue to receive 100% of the income taxes for the retained employees – about $270,000 a year. Officials believe even with the 75% credit, the additional jobs will add about $53,300 per year in income tax to the city over the life of the agreement. After the seven-year agreement, the credits will cease.
At Monday’s meeting, council unanimously approved eliminating the third reading of the legislation, meaning a final vote on the agreement will occur following a public hearing and second reading at the May 13 council meeting.