WESTFIELD – The City Council voted last night to create an economic opportunity area (EOA) and to approve a tax incentive financing (TIF) package for expansion of an existing business in the city.
City Advancement Officer Jeff Daley said that Mestek Inc., an HVAC and metal forming equipment manufacturer headquartered on North Elm Street, has requested the city to also create an economic opportunity area (EOA) at its leased Westfield Industrial Park Road facility.
The company has already invested nearly $1 million into the facility, with a total capital investment of more than $2 million projected as it brings an Australian subsidiary company, Dadanco, to Westfield.
Daley said the relocation of Dadanco will retain 354 current jobs and increase the workforce by at least 15 new positions over the next five years.
Mestek is also seeking a nine-year TIF on that new investment, with a 100 percent discount in year one, 80 percent in years two and three, 60 percent in years four and five, 40 percent in years six and seven and 20 percent in years eight and nine.
Daley said the tax break applies only to the new $2 million investment and that the current building will continue to be taxed at the full commercial rate, about $62,000 a year.
Daley said that the state, which has to approve TIFs, has changed its approach and now requires long-term TIF packages and tax discounts. Daley said that change in approach is driven by the fact that the state provides a tax credit package with TIFs to bring manufacturing jobs into the state’s economy. Mestek will be eligible for state tax credits of about $300,000 for the Dadanco project.
Ward 5 Councilor Richard E. Onofrey Jr., chairman of the Finance Committee, said that he normally balks at long-term TIFs and those packages which reduce the business tax level below the residential rate.
“I don’t want businesses paying lower (tax) rates than homeowners,” Onofrey said. “But in this case they’re only paying the lower rate on the new investment, so they are not paying less than homeowners.”
Ward 4 Councilor Mary O’Connell said that she is concerned that nobody is ensuring that the businesses receiving TIF package fulfill the obligation to create new jobs.
Daley said that concern has been shared and that the state has established new reporting criterion based upon the “certified payroll” of the businesses to ensure that new jobs are being added to the workforce.
“It is a big concern, so now the state has a new reporting mechanism,” Daley said. “The state follows through to the end of the (TIF) term and the business could lose its certification, so it’s a much more stringent process.
Companies which lose their TIF certification could be subject to state tax credit and local property tax reimbursements for the period in which they failed to comply with the terms of the TIF agreement.
The City Council approved the 20-year EOA package, needed under state law to facilitate the nine-year TIF package, by an unanimous 10-0 vote, with Council David A. Flaherty abstaining because of a conflict of interest due to a business relationship with Mestek.
The council also approved the TIF package by the same 10-0 vote.
