Published in Manufacturing

Wacker Neuson sues Norton Shores after being asked for lost tax revenue

BY Sunday, January 20, 2019 08:13pm

NORTON SHORES — A company that moved out of Norton Shores before its tax abatements expired is now suing the lakeshore community and fighting the city’s demands for repayment of nearly $1 million.

Wisconsin-based construction equipment manufacturer Wacker Neuson Corp. said it should retain the tax benefits it has accrued because it had already fulfilled its investment obligations to the city, according to a lawsuit filed Jan. 10 in the U.S. District Court for the Western District of Michigan.

The company, which located a plant in Norton Shores from 2007 to 2018, also cited its role in finding another company to take its place as reason it should not have to pay back the funds.

Wacker Neuson closed its facility at 1300 E. Mount Garfield Road in August 2018, two and a half years before the expiration of one of six tax abatements it received from the city.

Norton Shores City Administrator Mark Meyers previously told MiBiz that with the closure, Wacker Neuson violated an agreement pertaining to one of the abatements and owes $951,346.94 in back taxes to the city.

In the lawsuit, Wacker Neuson argued the city was left in a “superior financial position” and that the company already had invested $9.5 million — more than its original commitment.

Attorney Adam Brody at Varnum LLP in Grand Rapids told MiBiz in an email the company ensured the property was taken over by another company, TGW Systems Inc., that would “provide at least the same economic benefit to Norton Shores.”

“The city is actually better off economically than it would have been had Wacker Neuson continued its operations there,” he said. “In addition, we believe that the contractual provision on which the city is attempting to rely does not apply to the factual circumstances of this case.”

According to the filing, Wacker Neuson in 2007 explored the possibility of making a $7.5 million investment in the city of Norton Shores by building a 168,000-square-foot manufacturing and warehouse facility and investing $500,000 in personal property for it.

In May 2008, the city approved an industrial facilities tax exemption for the company. The tax break would be in effect for 12 years, beginning December 2008 and concluding December 2020.

The agreement included a provision that “if the city were to lose out on the economic benefit of operation of the facility at the property, then the city could recapture those tax savings.”

According to the lawsuit, the agreement included a paragraph that states Wacker Neuson would be referred to as “the company” throughout the remainder of the document. But in a later paragraph explaining the clawback provision, the document refers to “the applicant” instead.

“The applicant shall remain with the local unit during the period of time for which the abatement has been approved and, if the applicant relocates, substantially reduces employment and/or operations, or closes the facility, the applicant shall pay to the affected taxing units an amount equal to those taxes it would have paid had the abatements not been in effect,” according to the agreement.

Wacker Neuson argues the agreement provides for circumstances in which the “company” relocates, but the “applicant,” remains in place, “such as when the underlying industrial facilities tax exemption certificate is transferred from the ‘company’ to a new ‘applicant’ that has purchased the facility,” which it says has already happened.

According to the Wacker Neuson, it secured another company to take over the Norton Shores facility it was vacating. TGW Systems, a Norton Shores-based supplier of automated equipment used to transport products, moved into the facility after it outgrew its nearby space on Grand Haven Road, as MiBiz previously reported.

TGW Systems committed to maintaining production and employment at the property, as well as make further investment, according to the filing.

Ultimately, Wacker Neuson left Norton Shores, relocating to its North American headquarters in Menomonee Falls, Wis., because it decided continuing to operate the facility “was not economically sustainable,” according to court filings.

“The fact of the matter is that Wacker Neuson had been losing a significant amount of money at the time the decision to relocate was made. It was not an easy decision for the company, but it was one that had to be made for the financial well-being of the company,” Brody said. “We are unaware of any basis for the city's claim that the company was ‘doing well’ at the time of the decision. That is simply not the case.”

Meyers previously told MiBiz the company’s relocation was a surprise, after “glowing reports” in 2017 from the Norton Shores location.

In an email to MiBiz, Meyers said the city is aware of the lawsuit but has yet to receive the complaint. He declined to comment on the pending litigation.

Wacker Neuson also argues the city violated its agreement when it sent invoices to the company to pay the taxes before holding a public hearing on the matter. The hearing took place in December, and Brody requested the city council rescind the invoice. On Jan. 2, city council denied that request.

The company is requesting it retain all tax benefits it has accrued and is asking for costs and attorney fees, according to the lawsuit.

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