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Nestle’s tax abatement will impact schoo
(by Sue Reid - September 27, 2012)
Nestle’s tax abatement will impact schools
By SUE REID
The city of Solon has entered into an agreement with Nestle through the enterprise zone program that will provide the company with six years of tax abatement for the construction of its research and development center.
In a related agreement, the city entered into a revenue-sharing arrangement with Solon schools, which are impacted the most by the abatement.
Nestle will receive an estimated $2.4 million in abatement over a six-year period. Of that amount, the schools will forego approximately $1.7 million in new revenues.
Under state law, when an enterprise zone agreement is done, the city must enter into a revenue-sharing agreement with the local school system because the majority of real estate taxes go to schools.
“When you are abating taxes, it is the schools that are impacted the most,” Solon Economic Development Director Peggy Weil-Dorfman explained. “The revenue sharing seeks to compensate the schools for some of that new revenue they are not receiving.”
The city has an agreement in place with Solon schools going back several years. The standard agreement is that the city share 50/50 new income tax revenues on a project. “On occasion, we do a special agreement that departs from that 50/50 split,” Ms. Weil-Dorfman said.
For the Nestle project, in addition to the 50/50 split, the city agreed to give the schools $27,834 annually for six years.
“If we were not abating the project, the schools would receive more new revenues,” Ms. Weil-Dorfman said.
Part of the revenue sharing is required by state law, “but the exact amount we agree on is between the city and the schools,” she said.
In addition to the revenue sharing, Nestle agreed to make a required annual donation of $10,000.
“Nestle has been a longtime supporter of another program with the schools, and (it) agreed to continue that,” Ms. Weil-Dorfman said. “We ask all companies that receive abatement to make their own donations to the schools, which Nestle agreed to do.
“The schools have always been very supportive of our enterprise zone program, so when we do use it, we come to an agreement with the schools that satisfies all parties.”
The company is making a $34 million real estate investment in addition to a $16 million investment for equipment, furniture and fixtures as part of the research and development center construction. It plans to construct a center measuring 150,000 square feet on approximately 17.62 acres at 5750 Harper Road, immediately to the south of the main Nestle plant.
Nestle is “making a huge investment in real estate, and the enterprise zone program lends itself nicely to that type of project,” Ms. Weil-Dorfman said. “Whenever a company comes to us with a project, we take a look at the available programs and determine what makes the most sense for the particular project and, in this case, it was the enterprise zone.”
The enterprise zone program is a state program, which Solon administers on the local level, that provides real estate tax abatement on construction. The last agreement Solon had under this program was in 2004.
Because the program is construction-related, Ms. Weil-Dorfman explained, “We don’t use it as much because we don’t see as much new construction Solon like we did years ago.”
At City Council’s meeting last week, Councilman Edward H. Kraus congratulated Ms. Weil-Dorfman and Mayor Susan A. Drucker for the agreement reached with Nestle.
Nestle is longtime corporate citizens of the city, Mr. Kraus said, and the research and development center will be a “great addition to Solon.”
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