State Income Tax was Factor in Company’s Decision to Relocate out of Wisconsin
Sheboygan, WI – January 26, 2018 – On December 14, 2017, the parent company of Mayline/Safco, Liberty Diversified International (LDI) announced they will be closing the Sheboygan Mayline/Safco plant and moving the operations to Iowa. The move will result in the loss of 185 positions.
Although the City of Sheboygan and Sheboygan County Economic Development Corporation (SCEDC) were proactive, a combination of factors led to the company’s relocation including: lack of sufficient modern industrial facilities in Sheboygan, State of Wisconsin joint reporting Income Tax, and challenges in recruiting and retaining workforce.
In August 2016, Mayline Company was sold to LDI which merged it with Safco. LDI purchased the business but not the real estate. Within weeks of new ownership, the SCEDC and City presented an aggressive offer to provide 20 acres of city-owned land, valued at $1,200,000, at no cost to the company in return for Mayline/Safco’s planned $15 million investment in new facilities. The land is located in the City’s planned new business park, adjacent to the Sheboygan Business Center.
“The knowledge that Mayline/Safco was seeking location alternatives became a catalyst for the Common Council and City staff to accelerate planning and execution of the new business center,” stated City Administrator Darrell Hofland.
In September 2017, Mayline/Safeco narrowed its Sheboygan focus to consideration of an existing building in the Sheboygan Business Center. City staff and SCEDC coordinated a revised incentive offer with the Wisconsin Economic Development Corporation (WEDC). Using Wisconsin’s traditional tax credit programs, a total of $1.9 million was offered in tax credits and forgivable loans to retain employment in Sheboygan.
LDI confirmed that the local incentive offer was comparable, although slightly less, than the package offered by the State of Iowa. In the end, the incentive offers were not a primary driving factor.
Mayor Mike Vandersteen stated, “The City of Sheboygan was strategically proactive, and I’m proud of our staff and Common Council.
In July 2017, officials from Mayline/Safco notified SCEDC and city officials of a key financial concern of retaining a Wisconsin business presence: the state’s joint reporting on income tax. With the purchase of Mayline/Safco, LDI owns a family of companies, creating a “nexus” in Wisconsin. Prior to the purchase, LDI was not required to pay Wisconsin income taxes on sales of products to Wisconsin-based firms. The acquisition of Mayline/Safco and the consequential change in taxation resulted in an estimated tax increase of $500,000 per year. By relocating out of state this tax would be eliminated.
In response, SCEDC and City officials contacted local state legislators, WEDC, and Wisconsin Department of Revenue to seek a solution for the tax but were told that state legislative changes would be necessary but improbable with the limited lead-time.
Mayor Vandersteen stated, “Rather than putting billions in attracting foreign firms, our state should be investing in domestic companies that have supplied employment for generations. Attracting a new company to an area is exciting, but often costs far more than nurturing start-up and existing firms.”
Dane Checolinski, Director of the SCEDC added, “It is sad that all the State of Wisconsin had to do was to forego collecting a tax that it had never collected before. It would have cost Wisconsinites nothing. We need the state legislator’s help to ensure this never happens to another Wisconsin community in this era of mergers and acquisitions.”
The final factor in Mayline/Safco’s decision to leave the area was the availability of workforce. Sheboygan County enjoys an unemployment rate of less than 2.5 percent and a very competitive workforce market. LDI officials were concerned by lack of historic population growth deemed necessary by the firm to support their long-term vision of growing Mayline/Safco.
Checolinski stated, “Mayline stated the lack of population growth has created a challenge. This is one of the key reasons why the SCEDC has pushed and will push hard for more apartments, condos and single-family units to provide capacity for population growth. Without more housing, Sheboygan County cannot accommodate the workforce needs of our employers…period. We will see more firms expand or relocate outside our boarders if we don’t jumpstart population growth.”
The SCEDC has been in contact with the Job Center of Sheboygan County and Bay Area Workforce Development Board to assist with re-employment of Mayline/Safco employees prior to the discontinuation of the company’s Sheboygan operations. With 3,000 available job vacancies, employees affected by this news will have assistance to find meaningful careers here in Sheboygan County.