An injection molding company made headlines in the local newspaper at one of its plant locations last week, and it wasn't the kind of publicity that most companies want or need.
The problem — the company asked for a tax break back in 2002 and promised a certain level of investment and new jobs in return. But the firm never met those goals, so the local city council decided not to renew the abatement.
We've seen a lot of this in the past few years. Abatements are available almost everywhere. Municipalities are eager for any kind of investment, any promise of new jobs. Manufacturing companies looking to expand are prized like precious gems.
But municipalities are under tight budget restraints, too, and if a company fails to deliver as promised, it's likely that someone will try to claw back some concessions.
The firm in this case, Rexam plc, bought the plant in question from Precise Technology Inc. last year. You can't fault the new owners for decisions made in the past. That's not our intent.
But this can be a serious problem.
Think of it this way: If your company can't afford to expand like you promised, it probably means you're not in a very good position to give back any tax abatements. That should be common sense, right? But you need to educate the folks in city hall so they understand your situation.
How should companies handle this? Here are some tips:
* Communicate. You're probably going to have to take the lead on this one. Most local government officials don't have the time or inclination to reach out to local businesses.
In one of our Web polls a few months ago, we asked readers how well local officials responded to their needs. The No. 1 answer was “some OK, some not.” That was less than 2 percentage points ahead of the worst possible answer: “They do not understand us or care to learn.”
The best possible answer, “They are great, I think of them as a partner,” was dead last.
But if you are lucky enough to have a good relationship with your local officials, chances are pretty good you can avoid this sort of problem.
Also, don't overlook the value of supporting local agencies and community groups, and encouraging managers and workers at your branch locations to do the same.
* Don't overpromise. Local politicians looking for headlines may encourage this problem. Let's say you know your company is going to add three presses and 12 jobs in the next year, and you think you may need twice as many of both. Just promise what you know. You can always go back and ask for another abatement later.
* Exceed expectations. There are some Japan-based original equipment manufacturers that, when they say they plan to add 100 jobs, always seem to add 200 instead. This is a great reputation to have.
* Look for alternatives to abatements. Utility rate breaks, training assistance, infrastructure improvements and below-market rate leases are among the options. Find out what's available; most areas have plenty of agencies willing to help coordinate an attractive package.