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Lawmakers send Meijer tax break bill to governor

Beth LeBlanc
The Detroit News

Lansing — Legislation headed to the governor's desk would create a tax break for automated equipment at a Lansing-area Meijer distribution site. 

The three-bill package would change Michigan tax law to exempt from sales, use and property taxes automated consumer goods handling systems that sort and recombine products into pallets for storage at distribution sites and eventual shipment to stores. 

The tax exemption would apply to similar machinery at distribution sites statewide, but Meijer anticipates an immediate effect at its Delta Township distribution facility where the company is planning a multimillion-dollar expansion, John VanFossen, of Meijer, told lawmakers Wednesday.

Meijer is the only facility in the state with the type of machinery to fall under the proposed tax exemption, VanFossen said.

The legislation passed out of House committee Wednesday, was approved on the House floor Thursday and enrolled by the Senate Friday.

The three-bill package would change Michigan tax law to exempt from sales, use and property taxes automated consumer goods handling systems that sort and recombine products into pallets for storage at distribution sites and eventual shipment to stores.

Gov. Gretchen Whitmer's office did not immediately return a request for comment on the bills. But the Department of Treasury and some school and municipal groups were opposed to the plan Wednesday. 

In a statement Friday, Meijer argued its case as "a Michigan-based company that continues to invest heavily in our home state."

"We are simply asking for a level of parity for Michigan businesses when it comes to incentives and flexibility that have been provided to out-of-state companies in the warehousing and manufacturing space," said Frank Guglielmi, a spokesman for the company.

VanFossen told lawmakers there would be no immediate loss for communities, just a curbing of future tax revenue growth that might result from the expansion. 

The legislation would "basically hold the line," he said. "Meijer will continue to pay about $1.6 million of additional taxes on the equipment out there."

In a similar $250 million to $300 million facility in Tipp City, Ohio, Meijer saved about $7 million on sales, use and personal property tax because of a state tax exemption similar to the one proposed, VanFossen said. 

He argued Meijer was at a disadvantage to recent Kroger or Amazon facilities that "shopped" for Renaissance Zones where there were existing tax breaks. If Meijer were to take the same route, VanFossen said, the company would have to disassemble its current in-state operations and shop for a new tax-friendly site in Michigan or elsewhere. 

House Minority Leader Christine Greig, D-Farmington Hills, questioned the tax break, noting concerns about "revisiting tax policy right now in the middle of a pandemic." She asked for more time to consider the impact on Michigan's "jumbled tax policy."

VanFossen agreed the tax code was a "jumbled and complicated mess" but noted real change to the tax code would take years. 

Meijer is a "hometown retailer" that pays $40 million to the state on its store property, real estate that the proposed distribution system would help feed, VanFossen said. 

The legislation was opposed by the Michigan Township Association, which stands to lose tax growth and tax revenue on replacement equipment, and the Michigan Association of School Boards. The Department of Treasury also opposed the legislation. 

Roughly 73% of sales and use tax revenue in Michigan goes to the school aid fund and the bill would "erode existing revenues and block growth going forward," said Jennifer Smith of the school board association. 

While the impact from one facility may seem small, similar tax cuts have added up over the past several years to a more than $200 million annual loss to the school aid fund, Smith said. 

"These bills may not seem like much on their face but as these industries grow, we lose the growth in the fund," she said. 

eleblanc@detroitnews.com