Garfield Twp. plans to sue Metavation

Garfield Township

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The Metavation plants on Cass-Hartman Court in Garfield Township sit empty Wednesday afternoon. Jan-Michael Stump/Record-Eagle

June 10, 2010

BY BRIAN McGILLIVARY bmcgillivary@record-eagle.com The Record Eagle Thu Jun 10, 2010, 07:30 AM EDT

TRAVERSE CITY — A local manufacturer that planned to close last year kept more than 100 employees on the job months longer than it intended after Garfield Township officials threatened to sue the company for more than $1 million.

Garfield's tough stance with auto parts supplier Metavation LLC originated with a strategy dubbed "claw back," in which government officials demand companies adhere to deals that save them big money through property tax abatements.

Abatements provide companies 50 percent breaks in property taxes. In exchange, the companies must remain open and maintain certain staffing levels for the length of the abatement.

Metavation last year said it planned to close its Garfield plant and lay off 122 workers. But township officials said they'd hold the company to terms of two property tax abatements that saved Metavation $900,000 and didn't expire until Dec. 30, 2009.

"We met and pointed out that if they closed in 2009 they would be looking at owing us well over $1 million," said Chuck Korn, township supervisor.

Terry Herzinger, Metavation's corporate controller, confirmed that discussions with the township prompted the company to postpone its plant closing until last month. He declined further comment.

"If we could have done something to keep them here for one year more or five years we would have, but this is all that we could do," Korn said. "I'm not sure the employees would be all that grateful to us because at this point they are still unemployed."

The township still intends to sue Metavation for about $400,000 in additional tax abatements granted in 1999 and 2004 on $15 million worth of equipment, Korn said.

Korn said he wasn't concerned if some contend the claw-back strategy makes companies think twice about locating in the Grand Traverse County community.

"If they are discouraged that they have to play by the rules they agreed to, then they are probably not the type of business we want in Garfield Township," Korn said.

Michigan cities and townships increasingly are using claw back as a tool, said Molly Whetstone, Garfield's assessing manager.

"When you are abating 50 percent of their tax bills, who do you think makes that up?" Whetstone said.

The township recently earned dividends from its first claw-back effort, a $1 million lawsuit against Tower Automotive LLC. The township settled for $265,000 plus attorney fees against the multi-national company that laid off 358 employees.

The township will receive about 5 percent of the settlement, with the rest disbursed to other local governments, Korn said.

The township settled for two reasons: Tower had filed for bankruptcy, and holes in abatement contract language for deals prior to 2007 created doubt over whether the township could recoup those earlier tax breaks, said Jeane Blood, township treasurer.

"We got just as much in mediation as they would have owed after 2007, actually a little bit more," Blood said. "And we've redone our contracts for future abatements to tighten up the language quite a bit and prevent this from happening in the future."