Cayman Chemical to lose Pittsfield Township tax abatement after $18.6M expansion stalls
Research products manufacturer Cayman Chemical Company Inc. is falling short of an $18.6 million growth plan it outlined three years ago in exchange for state tax credits and a Pittsfield Township tax abatement.
Cayman in 2007 received a $3.14 million tax credit from the Michigan Economic Development Corp. tied to a promise to add 208 jobs over the next several years. But the company’s Ann Arbor area employment has stayed flat since summer 2007, going from 166 in June 2007 to 170 today.
File photo | AnnArbor.com
The township’s Board of Trustees is expected to vote tonight to request that the Michigan State Tax Commission revoke Cayman’s tax abatement. State law stipulates that a company that receives a local tax abatement for a specific expansion project must officially launch the expansion within two years of the abatement’s approval.
But disappointing sales have prohibited the company from meeting its hiring goals and expansion, which included plans to spend $18 million on a 40,000-square-foot expansion of its two-building complex on Ellsworth Road.
Jim Militello, Cayman’s chief financial officer, said the company plans to return to the Pittsfield Board of Trustees in late 2011 or early 2012 to request a new tax abatement.
“We’ve just had to sit through this recession phase,” Militello said. “The company’s doing well, we continue to do well. It’s just a matter of putting it on hiatus.”
It was not immediately clear whether the loss of the tax abatement would directly affect Cayman’s MEDC tax credit, which was approved by the MEDC's Michigan Economic Growth Authority (MEGA) board. An MEDC spokeswoman did not return a voicemail and e-mail requesting comment.
State policy stipulates that companies must secure tax relief from their local municipalities in order to receive a MEGA tax credit. Companies that receive MEGA tax credits get a reduced tax bill only if they actually hire the workers they promised to hire.
Militello said it was his understanding that the company would not be required to return any tax dollars to the state.
Cayman’s struggles date back more than a year. The company had 184 employees in June 2009 before laying off 28 workers due to the loss of a few key products.
"The difficult decision to lay off valued Cayman employees was made after an exhaustive review of our entire organization, and with the greatest reluctance," Cayman CEO Kirk Maxey said in a news release last year. "With Cayman's revenue stagnant in the near-term, these actions were necessary to responsibly stabilize our finances and allow Cayman to remain financially strong and able to continue serving its 1,500 customers in a manner to which they have become accustom."
Maxey, who could not be reached by phone for this story, said in an e-mail that the company “had resumed hiring” and “returned to growth in revenue.” He didn’t provide specifics and did not address additional questions about the company’s market objectives.
Cayman produces some 4,000 products, including pharmaceutical ingredients and test kits for researchers.
In a letter to the township, Maxey attributed the company’s performance to general economic issues.
“Due to the financial difficulties commencing in 2008 and the continued downturn in the economic markets throughout 2009, we have been unable to commit the necessary capital needed to commence the facility,” Maxey wrote.
In the letter, Maxey requested that the township extend Cayman’s tax abatement. But the township cannot do so due to state laws.
“Cayman Chemical may apply again for the project since there is an established IFT district, when you are ready to proceed,” Pittsfield assessor Dwayne McLachlan told Cayman in a letter.
The company’s inability to achieve its hiring goals underscores the uneven effect of the MEGA tax credits on the Ann Arbor region.
In 2006, for example, Google received a MEGA tax credit to offset the cost of launching an AdWords office in downtown Ann Arbor with plans to hire 1,000 workers by 2011. But Google, with just over 250 workers at the office today, is only a quarter of the way to its promise.
On the other hand, California information security firm Barracuda Networks - which received a MEGA tax credit in 2008 to support its plan to hire 185 workers by 2016 - is aggressively hiring employees to staff its office on Depot Street. Barracuda employs about 100 employees in Ann Arbor with six years to reach its goal.
Other Ann Arbor area companies that have received MEGA tax credit in recent years include Quantum Signal, Grand River Interactive, AVL Powertrain, Sakti3, Atwell-Hicks, Quantum Learning, Essen Instruments, NetEnrich, MyBuys, ForeSee Results and GDI Infotech.