Mangieri to Maytag: "Pay Up!"
State's Attorney threatens to sue firm for $1.2 million
by Mike Kroll
Late Tuesday morning the Courthouse parking lot was near capacity, as was Knox County States Attorney Paul Mangieri's third-floor office as he began a press conference announcing his plan to force Maytag into returning $1.123 million dollars of property taxes abated during the 1990s. All six regional television stations, both radio stations and many newspapers were present to hear details of Mangieri's million dollar lawsuit. If Mangieri is successful this will amount to a windfall for six local taxing bodies including Knox County, the City of Galesburg, the Galesburg Sanitary district, School District 205, Carl Sandburg College and the City of Galesburg Township. But before Mangieri can file the lawsuit he must first solicit participation from each of these taxing bodies in what amounts to a no-risk gamble that could set legal precedent statewide.
The precipitating factor was Maytag's announcement back in October 2002 of the company's intent to close the Galesburg plant and move production of side-by-side refrigerators to a new plant in Reynosa, Mexico with Galesburg's top-mount production moving to the recently purchased Amana plant in Iowa. We now stand less than a month away from the announced closure date of the production plant and an estimated sit-nine months from closure of the massive warehouse. The net effect was to eliminate in one fell swoop this county's largest employer who just a few years ago boasted a payroll of over 2,400 employees. A series of cutbacks preceding the closure announcement had already cost over 800 well-paid Maytag jobs.
As bad as the closure announcement was it stung even more in light of the millions of dollars of state and local assistance and incentives that were given to Maytag to insure that this plant did not close. Yet the Newton, Iowa management of Maytag determined that the Galesburg operation was no longer "competitively viable" despite the company's own admission that the plant remained profitable.
Among the local incentives was creation of Galesburg's enterprise zone in June, 1984. In practical terms an enterprise zone permits a company to continue paying property taxes based on the unimproved value of a property for ten years following construction or other improvements. At the end of those ten years property taxes would again be calculated at the full market value of the land and all improvements. Before the state would sanction creation of the enterprise zone it was necessary for each of the impacted taxing bodies to pass supporting resolutions. Each of the six resolutions passed consisted of substantially identical language including a limitation that "the total abatement for each improvement shall not exceed $1 million for the ten-year period."
In 1989 Admiral completed construction of the warehouse on the west side of South Linwood Road and requested real estate abatement under the terms of the Galesburg Enterprise Zone that encompasses the area. In the years that followed Maytag purchased Admiral including the Galesburg facility. Between the tax years of 1990 and 1999 the total amount of abated property taxes amounted to $2,123,369 according to Mangieri-- more that twice the $1 million dollar cap. (Actually, Maytag's abatement exceeded the $1 million cap by $23,000 during the 1994 tax year.) Had the conditions of the enterprise zone been followed to the letter Maytag would have been paying property taxes on the full-market values of the warehouse beginning with the 1995 tax year.
In actual dollar terms this means that Maytag owes perpetually cash strapped Knox County $123,581 according to calculations supplied to Mangieri by Knox County Treasurer Robin Davis. Davis' figures also show that Maytag owes Galesburg $302,500; the Galesburg Sanitary District $41,704; Carl Sandburg College $65,907; the City of Galesburg Township $26,007; and most significantly $563,671 to Galesburg School District 205. Asked if he would also be seeking accrued interest on these tax monies Mangieri said that is yet to be determined. Mangieri pledged to represent the six tax entities at no cost so they have nothing to lose by joining in the lawsuit and potential much to gain.
Asked to explain his motive for pursuing the lawsuit and Mangieri looks you straight in the eye as he says: "Everything we do in society is based on trust. Whether in our personal or business lives and especially as pertains to our political lives trust is paramount. I believe that trust has been broken at the highest possible levels of the management of Maytag corporation. As States Attorney I felt it was my responsibility to look into what we could do in light of Maytag's decision to close this Galesburg plant. After much study we came up with the concept behind the present lawsuit." As if to further emphasize just how badly the Maytag management has damaged this trust Mangieri said he purposefully delayed announcement of this lawsuit so as to not give the corporation any reason to further hasten closure of the Galesburg plant.
While it is presumed that Knox County will quickly approve participating in Mangieri's lawsuit the two biggest tax bodies with an interest must also participate for the move to make sense. Reached by phone Wednesday morning Galesburg Mayor Bob Sheehan said, "While I am intrigued by the prospect of this lawsuit I really can't speak for the city council as we have yet to discuss the issue. I will say that I personally would be inclined to pursue this as long as there appears to be no cost to the city." The only potential downside Sheehan foresees is that some might make the case that participating in a lawsuit of this type may be seen as anti-business at a time when the local economy demands we make ourselves as attractive as possible to any prospective new employer.
Galesburg School District 205 board president Mark Hirshberg is out of town assisting his son's move to college and unavailable for comment. However Jim Rich, finance director for 205 says the prospect of recouping over half a million dollars seems mighty appealing in light of the district's deficit budget. Rich said that he and superintendent Neil Sappington have seen Mangieri's documents and shared them with the school district's attorney Tom West. "Until the matter is discussed by the school board it would be premature to presume the whether or not the district will participate."
The folks charged with local economic development, the Galesburg Regional Economic Development Association, did not return telephone calls made Tuesday afternoon. The receptionist answering the phone at GREDA said that president Eric Voyles is on vacation this week but we did request a response from vice president Linda Utsinger who did not return our call.
Since the inception of enterprise zones and other taxpayer incentives created to stimulate business or industrial development, attraction or retention there has been much controversy over the many examples of businesses who solicited and won such lucrative incentives only to abandon their commitment to the community shortly thereafter. However painful the Maytag closure is for the Galesburg area it is not unique and until Mangieri's announcement there did not appear to be any recourse since the state statutes permitting such programs include no enforceable obligations on the part of businesses who partake.
The language of the resolutions that each tax body must pass to enable enterprise zones or tax increment financing districts can be used to hold participating businesses accountable for offered or implied. Instead of the frequently unenforceable oral commitments that are thrown around during discussion of the creation of such zones these enabling resolutions can set forth clear legally binding conditions for participation in economic development incentive programs.
Over the remainder of August and through the month of September Mangieri will be meeting with the six tax bodies to solicit their participation in the lawsuit. He anticipates filing sometime in November with a request for declaratory relief and Maytag's legal team is sure to fight meaning that it could be many months before Maytag repays any of the abated property taxes.