CITY OF FERNDALE REQUEST FOR COUNCIL ACTION

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1 Agenda No. 5C CITY OF FERNDALE REQUEST FOR COUNCIL ACTION FROM: Derek Delacourt, CED Director SUBJECT: Industrial Facilities Exemption Certificate, 1220 E. Nine Mile, Garden Fresh Salsa SUMMARY & BACKGROUND: The Garden Fresh Salsa Company has submitted a new Industrial Facilities Exemption Certificate (IFEC) application for the existing Industrial Development District (IDD) located at 1220 E. Nine Mile Road. PA 198 of 1974, as amended, provides a tax incentive to manufacturers in order to enable renovation and expansion of aging facilities, building of new facilities, and to promote establishment of high tech facilities. An IFEC certificate entitles the facility to exemption from ad valorem real and/or personal property taxes for a period of 1 to 12 years, to be determined by the local unit of government. A certificate holder will pay a specific tax known as the Industrial Facility Tax. Applications are filed with the clerk of the local unit, are reviewed and approved locally. All applications are subject to review at the state level by the Property Services Division and the Michigan Economic Development Corporation. The State Tax Commission is ultimately responsible for final approval and issuance of certificates. Exemptions are not effective until approved by the Commission. Garden Fresh is proposing to invest $1,600, in real and personal property over the next two years and will create new jobs at this location. Garden Fresh is seeking 12-year abatement in support of the investment. The request complies with City policy regarding the granting of tax abatements. The project falls just short of the recommended standards for a standalone 12 year abatement. By policy it should create more than 25 jobs and have investment greater than $2,000,000.00, (at $1,600, and jobs the project falls just short of the standard). However, evaluated as part of the larger project including the 1505 Bonner site the applications far exceed the requirements for the 12 year abatement. ATTACHMENTS: Garden Fresh Application Property Detail Certificate Resolution Certificate Agreement

2 COUNCIL AGENDA DATE: September 26, 2011 CITY ATTORNEY REVIEW: P. Daniel Christ 9/20/11 FINANCE DIRECTOR REVIEW: JCHubanks 9/20/11 CITY MANAGER REVIEW: April McGrath 9/21/11 RECOMMENDED ACTION: Moved by, seconded by, to approve the attached resolution granting an IFEC Certificate to Garden Fresh for a 12 year tax abatement in the amount of $1,6000, at 1220 E. 9 Mile which will create jobs and to authorize the Mayor to sign the IFEC Agreement, and further, to direct the City Clerk to submit the required documents to the State before the October 31, 2011 deadline for both Garden Fresh Salsa locations.

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6 1220 East Nine Mile Legal Description T1N, R11E, SEC 35 THOMPSON PARK SUB E FT OF E FT OF OUTLOT A, ALSO ALL OF LOTS 5 & 6, ALSO OF 'BONNIE OAKS SUB' LOTS 1 TO 8 INCL, ALSO PART OF LOTS 9 & 11, ALSO ALL OF LOTS 12 TO 15, ALSO ALL OF VAC ALLEY ADJ TO SAME EXC THAT PART TAKEN FOR FARROW AVE ALL DESC AS N E FT & S E 53 FT FROM NW SEC COR, TH N E FT, TH S E FT, TH S W FT, TH N W FT, TH N E FT, TH N W FT TO BEG, ALSO N 1/2 OF THAT PART OF VAC TROY AVE ADJ TO LOTS 11 TO 14 INCL FR 003, 010 & CORR

7 CITY OF FERNDALE RESOLUTION APPROVING TAX EXEMPTION CERTIFICATE Moved by, supported by, to adopt the following Resolution: The City of Ferndale has the economic objective of (a) increasing employment opportunities, (b) diversifying and stabilizing the industrial base of the community, (c) reducing economic obsolescence and blight of industrial properties, (d) encouraging industrial expansion, (e) providing for improved facilities in industrial areas, and (f) encouraging attractive, viable industrial sites; and The Industrial Facilities Act (PA 198 of 1974), as amended, empowers cities to establish Industrial Development Districts (IDD) and to grant tax exemptions for certain industrial properties which meet certain criteria established in the Act. The City of Ferndale scheduled a public hearing for September 26, 2011 for which the applicant, the assessor and the taxing authorities were given notice and afforded an opportunity to be heard. The City finds the following criteria established by the Act are met: 1. Garden Fresh Salsa Co., Inc. has been located in the City of Ferndale since As its business has grown, it has determined that it requires additional equipment and improved, updated facilities to remain competitive in the fresh salsa market. 2. Garden Fresh Salsa Co., Inc. has filed an application for a tax exemption certificate stating that -it intends to invest $1,600, at 1220 E. Nine Mile and create jobs. 3. The proposed facility is located within an Industrial Development District that was established upon a request filed by Garden Fresh Salsa Co., Inc. before the commencement of the restoration, replacement, or construction of the facility and granting this Industrial Facilities Exemption Certificate shall not substantially impede the operation of the City of Ferndale, or impair the financial soundness of any taxing unit which levies ad valorem property taxes in the City. 4. The commencement of the work on this facility did not begin before filing the application for the Industrial Facilities Exemption Certificate, except as allowed. 5. The application relates to a construction, restoration, or replacement program that, when completed, constitutes a new or replacement facility that is situated within an IDD duly established in Ferndale. 6. Completion of the project will retain and create employment. 7. The project does not constitute merely the addition of machinery and equipment for the purpose of increasing productive capacity, but will update the technology of an obsolete property. 8. The applicant is not currently involved with litigation of any kind against the City. 9. All conditions precedent as required by PA 198 of 1974, as amended, have been met. Therefore, it is determined and resolved that: 1. Granting the requested tax exemption certificate abatement for any and all property meeting the above criteria shall not exceed twelve (12) years. 2. The City of Ferndale approves this application with the following conditions: a. the certificate will be automatically revoked if the project is not completed within the time period outlined in the application. b. the certificate will be automatically revoked if the applicant becomes involved in any legal action contrary to the City s best interest. c. all abated taxes shall be repaid in the event that the business fails, closes, discontinues operations or moves out of Ferndale before the end of the exemption period. d. Garden Fresh Salsa agrees to all provisions of PA 198 of e. The accompanying agreement between the applicant and the City of Ferndale is approved and is to be sent to the Department of Treasury and the State Tax Commission with this resolution. 3. The certificate is transferable as provided under Section 21 of the Act. 4. The certificate can be revoked in accordance with Section 15 of the Act.

8 CITY OF FERNDALE IFEC AGREEMENT Garden Fresh Salsa Co., INC. hereinafter referred to as the Company has submitted an application to the City Council of the City of Ferndale, hereinafter referred to as the City for granting of an Industrial Facility Exemption Certificate (IFEC) pursuant to Michigan Public Act 198 of 1974, as amended. In recognition of the granting of the IFEC by the City and the benefit of the tax savings for the Company, and the economic growth of the City, Company agrees to the following: 1. The Company will furnish notification of the completion of the facility to the City Assessor and the State Tax Commission within 30 days of the date of completion. If there is no construction progress for a facility under construction for more than 180 days, the Company will notify the City Assessor. 2. Within 90 days of the date of completion of the facility, the Company will report: a. The final cost of the facility to the City Assessor and the State Tax Commission and a detailed listing of the new personal property acquired for the facility, including a description of the type, identification, year of acquisition and cost of purchase and installation for all construction and equipment. b. The number of jobs created by completion of the facility not including jobs transferred from other locations. If the actual project costs are more that 10% less that the estimated costs given in the application of it the number of jobs created are less than the number estimated in the application, the Company will provide an explanation. 3. The Company agrees to operate the facility for which the IFEC is granted for the term of the IFEC plus an additional 2 years after the date of expiration of the IFEC. 4. The Company further understands that if it vacates or fails to operate the facility for which the IFEC is granted for the period of time as outlined in Section 3 of this Agreement or lays off more than 25% of its work force for a period of six months or more prior to the end of the time specified in Section 3, the remaining term of years shall be null and void and all ad valorem taxes abated as a result o f the issuance of the Industrial Facilities Exemption Certificate shall immediately become due and payable upon demand by the City. In addition, the Company will be liable for repayment of future tax savings if there are any remaining years in the term of IFEC under provisions of Section 21(2) of P-A 198 of 1974, as amended. Failure to pay said abated taxes within thirty (30) days shall result in the City placing a lien on the tax rolls of the City and/or County, which lien shall not be discharged until the payment thereof and which lien shall be treated in the same manner as delinquent taxes. 5. The Company further agrees to pay it s abated real and personal property taxes timely and without penalty. In addition, the Company agrees to inform the City s Assessor/Treasurer of any plans to relocate the Company from any location within the City 30 days prior to the relocation. 6. The Company agrees to notify the City s Assessor/Treasurer of any change in the ownership of the Company s real and personal property assets or a majority share of the Company s stocks. 7. The Company further agrees to abide by all other City ordinances, building and zoning codes during the operation of the facility.

9 This agreement between the City and the Company is for the purpose of fulfilling the requirements of Section 22 of PA 198 of 1974, as amended. In consideration of this exemption certificate, the Company understands that through its investment of money, and the City understands through its investment of Industrial Facility Tax, they are mutually investing in and benefiting from this economic development project, and further agree that 1. The applicant has met the conditions of the Policy for Granting Industrial Facilities Exemption Certificates Pursuant to Act 198 of 1974 adopted by City Council on, Granting the requested tax exemption certificate abatement for any and all property meeting the above criteria shall not exceed ( ) years. 3. The City of Ferndale approves this application with the following conditions: a. the certificate may be revoked if the project is not completed within the time period outlined in the application. b. the certificate may be revoked if the applicant becomes involved in any legal action -against the City, including while the IFEC is in force, petitions or appeals to a court or the Michigan Tax Tribunal seeking a reduction of the true cash, assessed or taxable value of its facility. c. all abated taxes shall be repaid in the event that the business fails, closes, discontinues operations or moves out of Ferndale before the end of the exemption period. d. Garden Fresh Salsa Co., INC. agrees to all provisions of PA 198 of The certificate is transferable as provided under Section 21 of the Act. 5. The certificate can be revoked in accordance with Section 15 of the Act. 6. The terms and conditions of this agreement shall bind the assigns, successors and designees of the parties. Michigan Law shall govern this agreement and any disputes arising hereunder. Venue for dispute resolution shall be in a state court of competent jurisdiction in Oakland County, Michigan. 7. No fee of any kind in excess of the fee allowed under the Act, as amended, has been made, charged or promised in exchange for favorable consideration of the IFEC application. This Agreement may only be altered by written agreement of both parties. COMPANY: WITNESS: BY: ITS: DATED:

10 ACKNOWLEDGED BY THE CITY OF FERNDALE BY: BY: ITS MAYOR ITS CLERK DATED:

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