This article is an update on the previous post EDC Recommends Approval of Tax Abatement for Tasus Corporation. The Monroe County Council will be voting tonight (12/13/2011, beginning at 5:30 PM) on approval of a tax abatement on personal property (capital factory equipment) for Tasus Corporation, which the company estimates will result in the creation of 7 new jobs.
Beginning in 2009, with the tax abatement granted to Printpack, the Monroe County Council began the practice of requiring a Memorandum of Understanding (MOU) with all companies that receive a tax abatement. The MOU is a contractually binding document that clarifies the mutual responsibilities of both parties — the company receiving the abatement and Monroe County Government. Monroe County Government agrees to provide the abatement on new taxes generated by the company’s investment, and the company receiving the abatement agrees to actually make the investment and generally maintain some particular level of employment. Other terms may have to do with the contractors used in any construction, green construction requirements or other environmental requirements, and wages and benefits for employees.
There are also two other very important clauses in all MOUs from Monroe County: (a) one that requires that any litigation be conducted in the Monroe County Circuit Courts (so a company couldn’t breach the agreement and make it too costly for Monroe County to enforce the agreement by dragging the litigation into an out-of-state court); and (b) one that makes the agreement binding on any other companies that may purchase or be purchased by, or merge with the company signing the MOU.
The reason for the MOU is that in the past, the only remedy for non-compliance with the terms of an abatement would be rescission of the abatement, a remedy that is so likely to be contested successfully in court that almost no local government would attempt it. The MOU defines “substantial compliance” with the terms of employment that the company promised when it sought the abatement (in the so-called “Statement of Benefits”) precisely. This way, with the MOU, local governments and the company can both determine unambiguously if substantial compliance with the terms of the abatement, and noncompliance can trigger specific remedies — usually refunds of the tax benefits gained through the abatement.
The MOU with Tasus Corporation that the County Council will vote on tonight, if they vote to approve the tax abatement, is available here: Tasus MOU Draft 12 December 2011.
The most salient clause in the MOU is the definition of substantial compliance with their statement of benefits:
Tasus shall be considered in substantial compliance with the terms of this MOU provided that
the equipment is purchased, installed and utilized at its Monroe County manufacturing
facility throughout the duration of the Abatement, maintains a total full-time workforce of
at least 128 persons, beginning at least by April 15, 2011, and meets the provisions of IV
Tasus currently has 123 employees, before this new equipment is installed. In this MOU, Tasus is essentially agreeing to maintain a minimum of 128 employees throughout the 10 years of the abatement, meaning that at least 5 net new jobs will be created and maintained (and that other jobs will not be eliminated in the process). Any full-time employment level lower than 128 would trigger the remedies identified in the MOU.