October 1, 2014
Dear Westfield News,
I feel compelled to write this Letter to the Editor to explain my concerns about the $600,000 tax cut for Prolamina, and to add a few more details than could fit in the two articles that appeared in today’s paper.
I find myself in a strange position. I’m the one who usually fights for businesses, and tries to lower their costs and reduce their government burdens. I’ve talked about the heavy financial burdens placed on our businesses when compared to neighboring cities and states. I’ve defended businesses when my more liberal friends talk about “corporate welfare” and other such things. However, I can’t defend this tax cut deal. I know they have a right to ask for it, and I know they have an obligation to do what’s best for their company, their employees, and their customers. But, this is corporate greed and manipulation at its worst. They are pressuring a city that is in desperate shape, they are threatening the livelihoods of their long-term employees that helped to make them so great, and they are asking every other taxpayer in town to pay more so that they can pay less. This just isn’t right.
They don’t seem to be concerned about the middle class, fixed income seniors, and low income taxpayers who can barely make ends meet – those whose income hasn’t kept up with their property tax increases.
My discussions with the L&O Committee and with the executives from Prolamina were based on financial numbers that they provided us, and based on my long-standing concerns about the city budget and taxes.
Here’s what they told us: they have 256 employees in Westfield, a Westfield payroll of $17 million, and sales of about $300 million. They are a successful company that has grown from a rather small operation in Westfield to a leader in the industry. Their customers are some of the biggest names in the food industry. Their performance metrics are the best in the industry. Their operating costs in Wisconsin are lower than they are in Westfield. They lease the current facility in Westfield, and are at a point in time where they need to decide whether or not to renew (for 20 years). They need to fix leaks in their roof and upgrade parts of their facility in order to be in compliance with food industry specifications. They want to enhance the cosmetics of their facility so that they have a building that impresses visitors, customers, and potential customers. They want to expand operations and hire a dozen new employees over five years due to a growing demand for their products and services.
They are a wonderful success story, and Westfield is proud to have them here.
My concern is that the city cannot afford a $600,000+ drop in revenue in the first five years. Over the long-term, we’ll generate more taxes due to higher property valuations, but in the city’s current financial shape, we can’t afford to take the hit. The city’s budget for this year is over $2.5 million short. We have to drain some savings, and the mayor asked for new taxes (hotel and meals taxes), just to make ends meet. He agreed to 1 percent, 2 percent, and 3 percent raises in the labor contracts for the coming years. If we’re short now, how does anyone think we’ll cover the bigger raises in the future – nevermind the $400 or so million (net present value) in long-term debts and obligations?
I’m also concerned that this will set a precedent, and that all future development projects will ask for the same thing: a discount on all of their taxes – not just on the new investment. If we do this, what’s to stop Advance, Berkshire, Home Depot, Walmart, C&S, Micro Abrasives and all the others from asking for the same deal?
During the L&O meeting, Councilor Adams said this is a “no brainer”. He was looking at the threat of losing the 256 jobs, and suggested that we owe it to those families to do what it takes to keep them here. That’s what got me involved in the conversation. I think our primary duty is to ALL of the residents – not just the 256 employees. When I asked Councilor Adams where he’d recommend that we cut $160,000 from the city budget, of if he’d want to terminate 4 or 5 teachers, firemen, policemen, or city hall workers, he said “yeah, we need to protect these jobs”.
I then explained the math…
The $160,000 tax cut in the first year is equivalent to 0.00053 of their revenue – not 5 percent, not 1 percent, 5.3/100ths of 1 percent. They can easily tweak their business to cover that 5.3/100ths of 1 percent. They don’t need to pressure the city or further burden the other businesses and homeowners in town. If they can’t figure out how to do this, maybe we could offer to give them a Community Development Block Grant to hire a consultant who is familiar with their industry to help them out?
If you compare the tax break to payroll… this tax break is equivalent to less than 1 percent in the first year, and even less than that for the next foru years. Again, a great company like theirs, with great hard-working employees, should easily be able to make up the $600,000+ over five years – that’s only about $468 per employee per year. If truly necessary, I’d bet their employees would consider taking a $468 pay hit to guarantee that their jobs would be safe for the next 20 years.
This company does not need this. They are just pressuring the city because they can – not because they need the break to justify the expansion.
They told us flat out that they would not be closing anytime soon if they didn’t get this discount. They are using the threat of losing 250 jobs to play “chicken” with the city.
They need to fix their roof and expand their building because their business requires it – they’re booming. A good portion of the $7 million in new investment is going to cosmetics. I’m thankful they will be helping to improve the look, but they have a pretty darn nice place right now when compared to other industrial sites in Westfield, and the fact that they are pursuing cosmetic work in this down economy speaks to their business strength and financial status.
I hope that the taxpayers of Westfield do a little research and communicate with their city councilors before the vote on this matter. I hope that those who support giving the $600,000 tax break will stand-up and tell us where they see the replacement revenue coming from, or where specifically they are willing to cut the city budget.
Sincerely,
David Flaherty
City Councilor
