Payback Time

A Snapshot of Public Subsidies at the Sawmill

Sawyer Lumber began operations in 1997 after acquiring 145 acres of land, buildings, and personal property at the former K.I. Sawyer Air Force Base near Gwinn, Mich. The owners acquired the property for $200,000 from the state after it was conveyed by the Air Force to the Michigan Jobs Commission. The company insisted on outright sale, rather than a 20-year lease with $60,000 annual revenue to public agencies initially favored by the state. The sawmill was connected to existing base infrastructure, and Marquette County later assumed responsibility from the state as the "local redevelopment authority" for the K.I. Sawyer base conversion project.

Tax abatements
The mill is located within Forsyth Township, which in November 1997 approved a real and personal property tax abatement for 12 years, the maximum allowed by state law. It was then approved by the Michigan tax commission. The abatement, which extends to $20.5 million in personal and real property at the sawmill, is for 50 percent of local taxes and waiver of the entire state education tax. In May 1996, the Michigan Jobs Commission estimated this abatement to be worth nearly $2 million over 12 years. Despite the abatement, the company owed over $200,000 for delinquent personal and real property taxes, plus interest and administrative fees until payment was made after the June 16, 2000, sale of the mill.

The Forsyth Township resolution approving the 12-year abatement stipulated that "a minimum of 87 jobs shall be created and maintained during the life of the abatement." With the change in ownership, the Township would be required to issue a public notice and allow public comment in order to approve transfer of the tax abatement to Louisiana-Pacific Corp., the new owner. The new owner must apply for the transfer.

Lumber storage area improvements
Sawyer benefited from $795,000 in Community Development Block Grant (CDBG) funds that were used to construct and pave log and finished lumber storage areas. The construction was performed by Forsyth Township utilizing CDBG funds obtained through the Michigan Small Cities program.

Startup loans from public funds
The company received over $1.5 million in loans from federal and state funds to help finance its working capital and startup costs. Funding sources included CDBG funds from U.S. Housing and Urban Development, the Rural Development program of the U.S. Department of Agriculture, and the Michigan Small Cities program.

Training grants
Non-profit agency Northern Initiatives, and the Six County Employment Alliance were extensively involved in federally-funded recruitment and training of workers to meet guidelines that Sawyer Lumber benefit economically disadvantaged, local people. The Michigan Economic Development Corp. has reported $79,622 in training grants for 2000.