Mayor Clark called the meeting to order at 7:05 PM

ROLL CALL: Mayor Clark, Mayor ProTem Lorenzo, Council Members Bononi, Crawford, Csordas, DeRoche – absent/excused, Kramer

Member Csordas added #2 to discuss the City Manager’s reception on 2/25/00.

Mr. Capote said the City of Novi has had great economic success with the creation of the OST Zoning District as of April 1998. He thought it was turning the development trends towards research and development type companies seeking Novi. Some of the companies that are pursuing Novi are eligible for programs offered through the state. One is the Michigan Economic Growth Authority or MEGA. Several companies have approached Mr. Capote and his department regarding the local commitment that is required if a company is to be eligible to work with the MEGA Program. The big question that many companies are asking is if the City of Novi would participate with tax abatements or any other local participation that is required under MEGA. Mr. Capote said Dave Schriber and Maureen Krause from Oakland County Economic Development and Steve Opper from Michigan Economic Development Corporation were present to address questions.

Member Csordas asked if the application for abatement had to be filed no later than six months after the project had been started?

Mr. Capote said for an Industrial Exemption Facilities Certificate that might be the case. However, it is not the case if it is an application for MEGA. A Company could pursue a straight out tax abatement if the community had established an Industrial District that it wanted to develop and to offer an incentive to a company. A local participation with MEGA could be in the form of tax abatement but it did not have to be. It could be some other gesture by the community to support a project such as, infrastructure improvements, waiving of permit fees, site plan review, etc. He said under MEGA no, the project would have to remain confidential.

Under an I.F.T. the answer would still be no because no one would make that kind of an investment unless they have assurance from the community that they are going to be able to receive a tax abatement. The distinction is when a company is applying for a MEGA application through the state one of the criteria is that confidentiality needed to be maintained.

Mr. Opper said Mr. Capote is discussing the MEGA incentive that the state has combined with abatement. If looking at a straight abatement there is a requirement in Public Act 198 that the abatement can not be filed beyond six months from the date that the construction started and that is correct. However, that is just on a plain abatement without MEGA.

Member Csordas asked if land was excluded from any abatement? The answer was yes.

He asked Mr. Opper to explain the State Education 6-mil abatement that must be requested prior to the site selection?

Mr. Opper said the State Education Tax is a piece that the state can abate 50% or 100% on projects if it’s the 6 mils. It is something that is used judiciously as used with MEGA in determining whether or not they should move forward. They would not do that unless the local community would offer the local tax abatement portion.

Member Csordas was pleased to see that the applicant was required to stay in the City for the full term of the abatement and if they leave prior to the end of the abatement period they must repay all of the abated taxes in full.

Mr. Opper said that was not by statute but it could be a provision of the contract agreement between the City and the company.

Member Csordas asked if it was a 12-year maximum and the SPT Single Tax Credit does it affect the City or municipality. Mr. Opper said yes it is 12 years and no the SPT would not affect the City.

Member Csordas said the Madison Heights and Livonia policies included in Council packets were very good and asked if a one-time fee could be charged to start the process?

Mr. Capote said he would have to look into it but did know that the City of Dearborn is establishing fees for their Industrial Facilities District to cover overhead, Public Hearings, administrative costs and etc.

Mr. Watson said the statute says a fee can not be charged outside what is permitted in the statute. The statute said the fee had to be based on the actual cost of processing the application and is capped at 2% of the amount of the abated taxes.

Member Csordas recommended that they do not classify projects.

Member Kramer asked for an explanation of the difference between the IFT in this process and MEGA. He said MEGA is a top-level state program that does not have any association with IFT. Is that correct?

Mr. Opper said that was correct. MEGA is a two-part business incentive program that offers a personal income tax credit to a company creating a certain number of jobs. There can also be

a component of the Business Activity Credit or a credit back against the single business tax. When looking at the MEGA legislation there is a requirement that the local community where the project would be going has to participate in some fashion. The question is what is the participation going to be and in what instance?

Member Kramer said of companies interested in internally in pursuing tax abatement where ever they are shopping what percentage of those would be eligible for MEGA? How would MEGA companies be classified versus all the other companies that are looking for support incentives and abatements?

Mr. Opper said he could not tell him the percentage but the MEGA legislation limited them to 25 MEGA deals a year. The requirement is for an in state company that is expanding, there has to be expansion, job creation is really what MEGA is all about. In state they have to create 75 new jobs to Michigan and if it is an out of state company they have to create 150 new jobs. The other aspect of MEGA is a But For Incentive package because this project would not have come to Michigan "But For" the MEGA incentive. It helps them level the playing field when competing against Ohio, Indiana or another state. One of the perspectives that the MEGA Board wants to know is what is the local participation going to look like. If the State is going to step up and incent the project they are going to look for participation from the community that would benefit.

Member Kramer said this could be a new small company with all new jobs. Mr. Opper said that was correct but they would have to provide at least 75 new jobs.

Member Kramer asked if on the IFT side of things does a project have to be designated as a district or should a district be set up ahead of time to consider abatements?

Mr. Opper said a district had to be established first and he had seen the footprint of a building be the district.

Member Kramer asked if there was a requirement that IFT’s be set up in advance?

Mr. Opper said they could also be in response to requests. He said a company might come to them and say they are looking at Michigan, Ohio and Indiana and would like to look at some Michigan sites and this is the scope of our project.

Mr. Opper said he is working on a project that has the potential of bringing several hundred good paying jobs to Michigan from other states. They are a MEGA candidate and have been looking at several different sites in Michigan trying to narrow it to one or two sites. This company is eligible for abatements from a local community because the operation is supportive to their manufacturing in Michigan. This is one of the litmus tests as far as whether or not they are eligible for abatement. They come to the Michigan Economic Development Corporation on the MEGA piece and say they are interested in leveling the playing field. Then the state runs numbers and looking at the MEGA scenario of this many jobs are being created and it is a large investment and what communities they have been looking at. Then the state looks at those communities to see what the local participation is. When it is an abatement the MEGA Board would look at it and say this company is eligible for an abatement, they would like to see the community offer an abatement as their part of the participation.

Member Kramer asked if there were any negatives for companies applying for MEGA?

Mr. Opper said they do very intense across state analysis and they have to have an offer in hand from out of state or an analysis is done through the University of Michigan analyzing the economic impact of offering a MEGA credit. There is an application fee involved, which would stop some activity by companies just shopping.

Member Kramer asked if this was for in state companies as well as out of state companies?

Mr. Opper said if it is an in state company they have to look at out of state opportunities as well. If a Michigan company comes to them with a project and they were not sure where they would put it but it would create 100 jobs they still have to have a competing offer out of state.

Member Kramer said if there was a Michigan company that was relocating, expanding or what ever and they had no interstate competition then they are not a candidate for MEGA. Mr. Opper said that is correct.

Member Kramer said MEGA would not sort out all the companies that would rank high under these criteria. Mr. Opper said that is a fair statement.

Mr. Opper said they could see if the project was worthy of a MEGA application then what is the local participation going to be?

Mayor Pro Tem Lorenzo said with the IFT Abatement the taxable value would remain fully on the land. Is the tax rate cut in half when there is abatement? Is that for Novi only or for all of the units that Novi collects for as well so everyone’s millage is cut in half? Mr. Opper answered yes.

Mayor Pro Tem Lorenzo asked on what basis is the taxable value for the abated project determined.

Mr. Lemmon, City Assessor said tax abatement does not affect appraisal or taxable value and the only benefit is through the reduced millage. If it is a $20 million project it would be appraised the same as the next $20 million project.

Mayor Pro Tem Lorenzo said as the property value rises would it still receive the taxable value based on the rising values but the millage would be cut in half. Mr. Lemmon said that is correct.

Mr. Lemmon said the land and the buildings are valued normally. There can also be a situation where there is an existing building and they are doing an expansion. As long as they are in the district they can ask for abatement on any expansion to include personal property in that expansion and the addition. However, the land and the existing part of the building would not be eligible for abatement. The part that is abated is still appraised and assessed normally. Taxable value is still capped on that portion. It is under a separate roll.

Mr. Lemmon said the assessed value on any property in Michigan is determined by December 31^st. The taxable value would only increase by new construction and additions to that or by the rate of inflation.

Jim Bacon, Oakland County Community and Economic Development Director, said they were talking about the new dollars of investment not the base dollars. Clearly, land is not affected in any existing values. People think abating taxes means that some of the existing tax dollars would be given back and that is not what it is about. It is about new dollars or incremental dollars and what percentage of those would be received.

Mr. Bacon said Auburn Hills had chosen to reduce the term of their abatement but still offer them to companies that choose to do business there. Troy has had personal property abatement for high tech for some time. They have recently amended it with specific targets eligible for a MEGA and then investment thresholds of $40 million and 500 new jobs. Southfield has adopted a case by case approach and Farmington Hills will be considering very shortly a policy that emphasized businesses that are already there. So a company in Farmington Hills would potentially be eligible for abatement and a company not in Farmington Hills would not under the draft policy there.

Mr. Bacon said communities that have a lot to offer are looking at this as a tool in their economic development kit and trying to determine how to shape it so that it meets their own corporate and government objectives.

Mr. Bacon said in regard to Troy, there is a provision under 198 to give abatements for redevelopment of properties and they are considering that because they are concerned about all the older manufacturing facilities on the south end of the City.

Mr. Bacon said it is their policy in Oakland County to try to bring potential investments to every community that they can. He said it was not their purpose to steer companies to communities and their interest was to make sure everyone understands the need to have clear policies in economic development.

Mayor Pro Tem Lorenzo asked if the tax abated area would be exempt from millage increases? Mr. Lemmon said they would not. They would still be under the 50%.

Mayor Pro Tem Lorenzo said if one of the governmental units increased the millage by one or two mils then if it was one mil they would pay a half a mil and if it were two they would pay one.

If the City increased its millage it would just be whatever it is cut in half.

Mr. Lemmon said that is correct. There is no cap on millage as far as it pertains to the IFT’s.

Mayor Pro Tem Lorenzo said the Community Commitment Statement is very general and perhaps vague. How is the community to gage what minimum is acceptable to still meet the MEGA criteria?

Mr. Bacon said it was a good question and not an easy one to answer. He said it is correct that the act does give the MEGA Board a wide range of what they would be looking at as far as local participation. He said they are beginning to see a trend with the board clamping down on local participation. Recently, they had a project and were going through all the analysis and determined that in order to bring the cost differential closer together from a competing state they had to offer a full 20-year MEGA. The community was offering a six-year abatement instead of a 12-year abatement and the MEGA Board wanted to know why the community was only willing to give a half of abatement when they were doing a full MEGA.

Mayor Pro Tem Lorenzo said she would keep an open mind but she thought in considering particularly IFT’s our community needed to be very cautious, disciplined and very selective. She did not want to sound arrogant but the City of Novi, in terms of the tax base and companies wanting to locate here, has been very successful. Novi is a community where people want to be and it has a lot of things going for it in terms of demographics, geography and infrastructure. She thought Council could afford to and should be selective.

Mayor Pro Tem Lorenzo had concerns about cutting millage in half particularly in the OST District. It was the tax base that attracted to OST, higher paying jobs and less intense on the infrastructure and City services. However, if that taxable value is cut in half then the potential is not gained of what was envisioned the OST would do for Novi. In order to consider abatement it would have to be very exceptional, extraordinary projects coming forward. One of the ways projects could be pared down would be based on a minimum threshold criteria whether $50 million or $45 million. She thought it would be helpful for Mr. Capote to give Council the current OST projects that are either already on line or coming forward with what their values have been thus far. Any particular tax abatement policy Novi might have she would want it to be the exception not the rule.

She was also concerned about how cutting the millage would impact the community. Are taxes going to have to be increased, are the schools going to have to increase taxes and who really winds up paying for this is the residents.

There is talk of library millage increases and a judgement is looming over us and if we have to pay for that judgement the millage might have to be increased. In attracting OST companies she hoped if the millage had to be increased these companies would be there to assist with that millage. If the millage is being cut in half for the abated companies then the advantage is gone. She would look for a minimum threshold investment. She read from the Planning and Zoning News of March 1997 regarding IFT’s and felt the information and criteria should be included for consideration.

Mayor Pro Tem Lorenzo felt that a pay back feature should also be included. In other words if

the jobs and wages that the company has projected are not met then they should pay back and compensate the community.

She was not opposed to considering a policy but thought Council had to be cautious, disciplined and selective.

Member Bononi said her questions dealt mainly with Public Act 198 or 1974 and particularly about how the application process worked.

Member Bononi asked what the distinction between an owned site and a leased site was? Her concern was that tax abatement could go to an absentee landowner.

Mr. Opper said if it is a leased facility and the company who leased the property paid the taxes they would be eligible. The owner of the building the lessor would not.

Member Bononi said if that is the criteria they would have to be sure who was paying the taxes?

Mr. Opper said it would be automatic and if the company did not pay the taxes they would not be eligible.

Member Bononi asked how much it cost for a local government to process an application?

Mr. Opper said it varied between communities and he would find out.

Mr. Bacon said in communities that have a staff that deals with economic development and land use issues it becomes part of their workload. If allocating dollars to the total process depending on the complexity of the project it would certainly be less than $5,000.00.

Member Bononi asked if the City bore the cost of that?

Mr. Bacon said the City paid the cost because their staff would do it as part of their workload.

Member Bononi said there is a reference to the fact that the tax abatement exemption could be extended by two to three years relative to the project completion. How would that address phased development?

Mr. Bacon said in Oakland County it is his experience that cities do it on each phase as each phase comes in.

Member Bononi read from page 4 of the Tax Abatement Application, number 11 stated that "a certified copy of the resolution approving the application must include the Impact Statement. "The governing body finds and determines that the granting of the Industrial Facilities Exemption Certification considered together with the aggregate amount of certificates previously granted and currently in force under Act 198 of the Public Acts of 1974 and Act 255 of the Public Acts of 1978 shall not have the effect of substantially impeding the operation of the governmental unit or impairing the financial soundness of a taxing unit which levies ad valorem property taxes in governmental unit."

Member Bononi stated Council would be attesting to the fact that granting the abatement would not hurt Novi.

Mr. Bacon said it goes back to the criteria about being very careful about the projects that are chosen to use for abatement. Those certifications, because of the administrative systems, are

pretty easy for communities to make on a given project as long as that project fits their economic development goals.

Member Bononi said she understood this to mean that Council would have to look beyond this language in looking at #1 Economic downturns, #2 Existing or potential debt burden and all of the other things Council would have to consider with regard to coming forward to being able to attest to such a statement not only in the short term but in the long term.

Mr. Bacon thought that was true and was why a lot of communities did not give 12-year abatements.

Mr. Schriber said in a recent case in Troy with Delphi one of the reasons they offered the abatement was that this company represented a very stable company which is the kind of

business they wanted when the economy turned down because it is a single purpose, single user building. They were more likely than a multi tenant office building to remain fully occupied and remain stable.

Member Bononi asked what the duration of the abatement was? Mr. Schriber said it was six years.

Mr. Opper said in the current business climate in Michigan the MEGA contributions in terms of incentives are where the significant dollar amount is. Even in a very aggressive local commitment it is still less than half of the total incentive package and it could be anywhere from less then 5% to 40% or 50% but he had never seen one where the MEGA was the minor part.

Member Bononi referred to the first page of the document and asked if it meant construction could not be started until it was approved.

Mr. Opper said that was basically it. If construction was started and someone approached the City and wanted an abatement or MEGA it would be too late.

Member Bononi asked, regarding the bottom of the first page, what if an applicant proposed to donate open space to the city, proposed to build a community pool or give as a gift some other item?

Mr. Bacon said as part of the practice of specific projects it is not uncommon to have those kinds of things become part of the project. If the project is about those kinds of things they could be counted as part of a total project. It is what the totality of the proposal is. It is much more difficult for projects with community centers, pools etc., which have an indirect relationship to an investment decision for a new office building or manufacturing facility. He thought they would not be seen as part of a total project. If a case could be made that there is, for instance, a donation of right of way to build an interchange would be something that could be discussed reasonably as part of the project.

Mr. Bacon said this had to be looked at on a case by case basis. However, cases where there are public improvements that directly relate to the viability of the proposed investment become folded in as part of the total discussion.

Mr. Schriber said the reason that language was put in about the direct costs was that early in the life of the IFT Act communities were negotiating and companies were basically buying their IFT’s or doing a large sum up front which got them in. This was an effort to get away from negotiating companies buying an IFT.

Mr. Schriber said as a tool it does give some negotiating abilities. In Troy’s case the City asked if they were going to build both towers at once because the only way Council would consider this is if both towers are done and they agreed.

Mr. Opper said with respect to MEGA they have a requirement that wages of the newly created jobs are to exceed the federal minimum wage standards by one and a half times. Plus if the number of jobs they said they would create are not created they did not get the credit.

Member Bononi would be concerned that with the economic times, as they are why would Council want to do this. However, she was not opposed to listening to any and all opportunities that the City of Novi has particularly with regard to OST. She was concerned with giving away the store and getting little in return.

Member Bononi had some of the same concerns Members of Council had in regards to are new jobs being created or are they being transferred from some where else? Are the new employees living in Novi or commuting which would bring more unwanted traffic?

She was concerned about having a policy that was too long and believed that such an acceptance of a proposal by the City should be one that is exceptional and not run of the mill. She was concerned whether or not large number employers would provide internal food facilities so there would not be an increased burden of traffic at noontime. She was also concerned about the distinction between new facilities and rehab. Farmington Hills is looking at giving this boost to companies that are already there. It is a very laudable thing and not something Novi should forget with regard to people who are already in Novi.

She would be interested in a policy of majority vote that does not allow for phasing. She would also be interested in specific language with regard to environmental assessment of existing sites. She would look for an acknowledgement of the citywide financial condition in order to know how far Council could go with this policy. She said any policy she would approve would be by a case by case basis and not an across the board policy.

Member Crawford said half of something is better than all of nothing and having said that he concurred with everything everyone had said. He felt it was important to be proactive and have a policy to address situations. He did not want to lose key opportunities but wanted to take advantage of them and be competitive not only with other communities but also the county and state needed to be competitive. He agreed with Mr. Bacon that this should be a tool in their economic development kit. He thought the policy needed to be very strict and very limited and done soon.

Member Kramer felt a policy was needed and supported many of the comments made. He thought the policy should not be strict but should give out judgement for Council to apply wisely in terms of whether a project is appropriate for granting of abatement. He said he would not

support an across the board application for Novi and would not support setting up a massive district and then waving flags.

He questioned what was abated.

Mr. Opper said land and old buildings are not abated but new buildings and additions are abated.

Mr. Kramer said elements to keep in mind for the policy have to do with as a project relocates from other communities that the other community needed to release the facilities and the jobs from their community. He felt one of the major criteria was to require supportive information to judge length time and minimum project size had to be established and he felt it might be an appropriate first cut.

He thought part of the philosophy they were implementing was to broaden the tax base in the community. Part of the criteria is they are looking for OST where the benefits more than out weigh the liabilities, where the facility fits the infrastructure and does not tax the infrastructure and that there would be spin-off benefits in terms of other businesses. He thought MEGA needed to be considered and needed a response from Council. He thought this should be the exception not the rule.

Member Crawford asked what was abated or not abated when it came to the local school districts?

Mr. Bacon said the business that received the PA 198 credit has their school taxes abated and then the state reimburses the schools up to the 6-mil limit. If there are voted levies in their district it is not reimbursed. It literally depends on where the project is and what the fiscal impact is for the school.

Member Csordas asked why Delwal was abated?

Mr. Klaver said it was a decision the Council made to keep that company in the community.

Mr. Lemmon said when the abatement expired the abated property was appraised as it normally would have been even if on the ad valorem roll. When the abatement expired it reverted back to the ad valorem roll and full millage would be collected on it.

Mayor Clark said they were being asked to consider a tax abatement policy and the future for those who would come afterwards. The decisions taken would have a direct and substantial impact on the tax burden asked of our taxpayers.

Mayor Clark felt such a policy would apply to plant rehabilitation in Industrial and other districts provided for by state law. Novi as a relatively young city would be looking basically at new construction. Not long ago there was encouragement to rezone substantial acreage in the City to OST so that high tech businesses would come to Novi thereby reducing a portion of the tax burden that would otherwise fall on the residents of the city. Businesses sought and encouraged would be high tech non polluting enterprises that would add to the City and be a plus to the City not only because of tax relief but in terms of the economic spin off that would be generated.

Mayor Clark said Novi can continue to grow and seek new challenges or stagnate, wither and die because of lack of creativity, vision or imagination. Businesses in this community face challenges and competition from across the street and around the world and government at the local level must be innovative and creative to secure our future when growth is over and Novi is a settled community.

If the City adopts a policy of tax abatement, revenues still increase and no abatement is forever and any company that sought abatements would be making a substantial monetary commitment to the community that they would not walk away from lightly in the future.

Mayor Clark thought to be competitive and look at the future some form of tax abatement policy should be adopted. He did not want to micromanage a company and suggest that they spend X millions of dollars in this community. If a major corporation comes to Novi there

would be substantial dollars and commitments for a long period of time. He did not want to see everyone get tax abatements and thought Novi might model its policy off of the State of Michigan’s policy. He did not want to dictate what salaries of the company’s employees would be.

Mayor Clark said they had to be very careful about how they crafted a tax abatement policy but thought Novi needed one and in the long run it would be extremely beneficial to everyone in the City to have such a policy.

Mr. Capote thought they could be back in 30 days with a couple of proposed policies based on the information of tonight and more that is enroute now. He would want to get with legal counsel, planning director, developmental services director and the assessor as well as others he is working with now.

Member Bononi asked that there be a more thorough beginning introduction overview so that those in the audience would have a clear understanding of what we are talking about.

Mayor Pro Tem Lorenzo asked that the current investment in the OST District both real and personal for each company within the district be included.

Member Crawford felt it might be useful to include some hypothetical situations to show that even though there is an abatement of X% of taxes that taxes realized more than offset services required for the City.

Mr. Klaver asked if this would be due back at a regular meeting or a special meeting.?

Mayor Clark thought it should be brought back as a one item Special Meeting. It was decided to come back on Monday with suggestions for dates.

Member Csordas thought the wrong message was sent to the City employees and that they felt excluded. He felt it was a demoralizing issue to the City employees that they were not invited to attend, meet and mingle with one of these people who might be City Manager. He thought Council should reconsider that position. Member Csordas advised Council that all the employees thought that they were not invited.

Mayor Clark said this Council has held the philosophy that the members of this community, including staff and administration have full participation in their own government. That policy is going to continue and certainly anyone in this community who wants to come can and staff and administration are welcome.

Member Csordas asked that Mr. Klaver issue a memorandum inviting the City employees. He would like to see as many employees come as possible because his experience was that they are hardworking and very dedicated people who want to get the job done and we owe them the opportunity to come and participate in this.

Member Crawford said Mr. Smith said not only are we trying to find out more about our potential candidates but also trying to sell ourselves and let the potential candidates know who they will be working with.

Mayor Clark said there are excellent employees in the City and candidates should be aware of that.

Clare Wilson, resident, stated he was opposed to abatements. He felt the infrastructure is over loaded at the present time, a bond issue could not be passed and there are water restrictions during the summer. An increased rate of development would bring in increased cost for police, fire, water and sewer and the tax benefits for an abatement system are long in the future and the costs are current. He said Council is asking the current taxpayers in Novi to shoulder that burden and he did not think it a correct policy to follow.

He said with the judgement in place against Novi that no one knows how it will turn out why should taxpayers be asked to subsidize an abatement program. He thought Novi had been attractive enough in the past to attract the kind of industry there is now. He felt the leap frogging to other cities might have happened because of the personnel they had to deal with in Novi.

_______________________________ ______________________________

Richard J. Clark, Mayor Nancy Reutter, Deputy City Clerk

Transcribed by: __________________

Charlene Mc Lean

Date Approved: March 6, 2000