East Lansing City Council on Tuesday night unanimously passed two resolutions that give TechSmith Corporation — an international software company currently located in Alaiedon Township — a personal property tax abatement if the company moves to occupy a new headquarters that would be built on the Michigan State University campus in East Lansing.
Even with the abatement, according to City staff, the project is expected to generate about $1.5 million over ten years in a combination of East Lansing income taxes and real estate taxes on the new building.
The first resolution passed by Council created an Industrial Development District on five acres of land leased by the MSU Foundation from MSU. The land is the site of Spartan Village off Harrison Road.
Personal property taxes are taxes levied on “movable” property — literally property that is not attached to the building. It includes things like computers and desks.
The creation of the special district was necessary as it is required under state law (Michigan Public Act 328) for the personal property tax abatement that TechSmith was seeking. The abatement for TechSmith was granted by Council on Tuesday.
Once TechSmith begins using the building (yet to be constructed), there will be a 10-year abatement on personal property taxes. The 10-year period comes with a specific waiver from Council because the period is normally two years.
East Lansing Director of Planning, Building and Development Tom Fehrenbach explained that because of TechSmith’s work as a software company, they’ll need to continually update their technology and equipment. Ten years is the longest waiver the City policy allows.
A memo from Fehrenbach estimates that the abatement will cost the City a little more than $20,000 annually and $224,459 in total. The land owned by MSU and being leased by TechSmith is already tax exempt, but the building itself and income will be taxed.
At no point in Tuesday’s discussion of the matter did anyone ask if TechSmith would proceed if the company was not granted the abatement. According to a memo from City staff in November, TechSmith “posited that this local support is a vital component necessary to gain the overall support from various State agencies, including the Michigan Economic Development Corporation (MEDC) and Michigan Works, which is ultimately necessary to fill economic gaps that exist in order to make the project viable.”
During discussion of the project, TechSmith CEO Wendy Hamilton explained that the impetus for TechSmith to move is the new location’s proximity to MSU’s campus. She explained that TechSmith has significant ties to MSU and does a lot of hiring directly out of MSU.
“It’s about talent acquisition,” Hamilton told Council. She said the location would make it easier for interns and employees to come to the company without using a car, an issue she framed as addressing inequities.
Prior to the public hearings and Council’s subsequent approvals, two members of the public spoke in opposition to TechSmith being granted the abatement.
Josephine Monterosso called and asked why a large company like TechSmith would need this abatement. She called it “backwards” to have a company telling a government how much it wanted to pay in taxes.
Anne Hill also called in and pointed out that Public Act 238 is designed to give “distressed” communities a means to incentivize companies to have offices and places of business there, helping to create lasting jobs. Hill pointed out that from 2015-2019, according to the U.S. Census Bureau, the owner-occupied homes in East Lansing had a median value of $192,800.
“I’m sorry, but that doesn’t sound like a distressed community to me,” Hill said. “These are numbers that Detroit, Dearborn, and Benton Harbor would love to have. To me, this seems similar to using HUD grant funds to build a retaining wall along a sidewalk on the property of a private legal firm.”
ELi Publisher and Executive Director Alice Dreger also called in, as a private citizen, and asked City Council to consider whether creating the special district on property-tax-exempt MSU land would attract companies away from locations where they might otherwise pay normal property tax. She also asked about the state’s intention with the definition of “distressed” communities.
Council member Lisa Babcock spoke along similar lines, pointing out that by relinquishing TechSmith of their personal property tax burden, that burden ends up falling elsewhere, on other businesses in East Lansing.
She repeatedly explained how she liked TechSmith, noting they have a female CEO and are a homegrown company, but bluntly said she finds it “unfair” that because TechSmith is “the shiny new thing,” they would not have to pay personal property taxes for ten years.
At the end of those remarks, Babcock urged other local companies to apply for a personal property tax abatement, even saying she would take notice to make sure they were heard.
Babcock did still vote for the abatement. And broadly, Council members seemed very supportive of having TechSmith in East Lansing.
Council member Jessy Gregg specifically lauded the project for two reasons. First, she acknowledged the partnership between TechSmith and MSU, and gave them credit for creating a pathway for students to land permanent jobs in the area. She also appreciated the fact that, like the income tax, this will create some stream of tax to East Lansing from campus.
“This is one way — it’s a small way — it’s a small building that will be subject to that real property tax. But it’s a step in the right direction. So for both of those reasons, I think this is a great project,” Gregg said.
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