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Tiffin council considers tax rebate request for seed dealer

Big incentive for Big Country

TIFFIN– At odds over a tax rebate request, Tiffin City Council members nonetheless directed city administration to proceed with the paperwork to financially assist a local business with a planned expansion.
Big Country Seeds owner Dan Steines returned to the council Aug. 13 to ask for another five-year, 100 percent property tax rebate for a second expansion of his business. Tiffin council approved Big Country’s first expansion in 2013, for which Steines’ received a five-year, 100 percent tax rebate; the first the city has granted for longer than three years.
That expansion was expected to add five to 10 new jobs to the operation.
Big Country Seeds, located just south of Interstate 80 at the Tiffin interchange, is a company that specializes in agricultural and turf seed, chemical and distribution fertilizer distribution, with a second building that provides warehousing opportunities for other companies. At the recent meeting, Steines told the council his last expansion created a building valued at $1.3 million and the proposed building would cost about $1.5 million.
City Administrator Michon Jackson recommended against a second rebate deal for Big Country Seeds.
“I am not against rebates in general, but I do think it’s unfair that a business would potentially have two simultaneously,” Jackson said. Because Steines asked for the deal to be structured as a tax rebate, the business would pay the taxes on the property, and the city would rebate the taxes through Tax Increment Financing (TIF) revenues. “If we are giving (Steines) a five-year and another (rebate) simultaneously, then someone else comes in (with a new business proposal) and wants money, we might not have money to offer them.”
Jackson also noted that Steines has room to expand with a third building as well.
“Additionally, he has the potential to expand another building beyond that, and every time he builds another, I’m assuming he is going to ask for another rebate. So the potential of having a 15-year rebate to one business is astronomical to me,” Jackson said.
Council member Mike Ryan said he had carefully considered the request, and talked to several people in trying to form his opinion. Ultimately, Ryan said, he was not in favor of the request.
“If your business plan is feasible then it ought to fly without taxpayer support. We have a great location and we are attractive to businesses as we are. I don’t know that we have to forego that kind of money,” said Ryan.
Steines defended the economics of the deal, speculating the city would benefit from the increased value of the property after the rebate period was over.
“TIF money is supposed to be used for economic development. This is truly economic development. The tax base in this town comes from commercial taxes, and this would be a huge step for the city to take to get more commercial taxes,” Steines said. He estimated, based on his current assessed value, that his expansion would generate about $30,000 per year in property tax after the rebate period. “This is something that the city could invest in long term to get more tax dollars coming into the community.”
Mayor Steve Berner argued that, while he supported Steines’ business, he was not in favor of large economic incentives for an existing business.
“Keep in mind there are many businesses in town, built in the last five years, that did not get a TIF rebate. You are being unfair to businesses that are already here,” said Berner.
Further, noted Public Works Director Brett Mehmen, expanding businesses affect city expenses as well.
“You have to take into consideration the impact on our infrastructure, our water and wastewater demand,” Mehmen said.
The request prompted Berner to recommend the city create an economic development policy to guide the council in its future decisions on tax rebate and abatement requests.
“The expansion is fantastic,” said Berner, “but I don’t really support individual tax rebates for business. (TIF) is a development incentive. We need an economic development plan that will develop rules for TIF rebates. If you start giving a TIF rebate to every business that builds a building, you’re going to have to do it all the time. We need to have a plan before we continue doing this.”
Upton agreed, but said until a policy is created and approved, the council should continue to consider individual requests.
“We are on a case-by-case basis at this point, so when someone asks, we can make a decision about it. I agree we need the economic framework, but in the meantime, I’m not afraid to go ahead on a case-by-case basis and keep working with this,” Upton said.
Ryan was not convinced.
“I think a business with a good business plan would make it without taxpayer support,” Ryan said. “Without a framework (policy), we are kind of catch-as-catch-can. I want us to be a business-friendly community. We want economic development, but it concerns me that it’s a significant community investment in a private business.”
Further, Ryan was concerned about opening the floodgate for similar requests.
“Get ready for a sled ride, because you are going to be doing this every week. That’s just the way it is. Maybe that’s a good thing, but I’m just saying, get ready,” Ryan said.
Upton argued that without an economic policy in place, the city is working with a first-come, first-serve method.
“I agree we need a framework. However, when you are (asking) should we give it to Dan as opposed to some future hypothetical developer,… well, bird in the hand. I would like to see us do what we need to do to get people comfortable,” Upton said.
Steines said he indeed thought it would be a good thing if his expansion generated more requests.
“It is going to generate huge tax revenue if you get three or four people coming to you with this. I think that would be awesome,” said Steines. “As a business owner, I’d take that all day long, that kind of return on my investment.”
He also pushed the council for action, saying he needed a decision right away in order to proceed.
“I need an answer from you guys. I can’t build it not knowing. It’s $250,000 we are talking about and I don’t have anything going in that building right now,” Steines said. “I asked for five years because it’s a long-term investment. I have enough revenue to make the building work, but when you start adding $50,000, $60,000 or as much as $70,000 (in property tax), that becomes strapping. You’ve got to build the building before you build the business. It is truly economic development in the making.”
Steines’ case was enough to prompt council member Jim Bartels to propose a compromise of a three-year tax rebate instead of five.
“Does that help anybody? Always before we’ve done two to three years, so why should we have to increase it to five on this?” Bartels asked. “I can live with three years. Otherwise I have to vote no.”
The council voted 3-1, with Ryan voting no, to draw up an agreement for a three-year rebate proposal for Big Country Seed’s second expansion.
Jackson said it will take between six and eight weeks for the city’s bond counsel, John Danos of Des Moines, to draft the agreement and return it to the council for approval.