Chelsea EBIP resolution sparks controversy

CHELSEA – The city of Chelsea voted to provide up to $25,000 to Chelsea Motors, LLC over a 7-year period as an economic incentive for Chelsea Motors and Chelsea Tire and Service, owned by brothers John and Mike Craft, to build a permanent building “to enhance the aesthetic appeal of the city” after a public hearing at a regularly scheduled council meeting on Tuesday, Sept. 19.

Mayor Tony Picklesimer said the resolution is part of the city’s Existing Business Improvement Plan.

“EBIP is an incentive for an existing business in the city of Chelsea to encourage the growth of their business and to grow sales tax revenues,” Picklesimer said. “The city of Chelsea is primarily funded through our sales tax, because we don’t have a property tax. It’s important to the city that we grow our sales tax base every way that we can.”

Picklesimer said the purpose of the EBIP program is to help existing businesses cover design and infrastructure costs related to business expansion.

Picklesimer said there are two parts to the EBIP agreement with Chelsea Tire.

Picklesimer said the city agreed to assist Chelsea Tire with a $250,000 project to build a permanent building by assisting with up to 75 percent of the cost of taxes the business pays on building materials.

“The first part is an economic incentive relative to the amount of taxes paid in for building material or for construction materials on the project,” Picklesimer said. “This is not a refund of taxes. It is an economic incentive tied to the amount of tax they pay on building materials.

Picklesimer said the second part of the agreement bases the balance of the incentive of Chelsea Tire on increased tax revenues, based on the increase of tax revenues from the current month from the same month of the previous year.

“They will qualify for an incentive of half of the increased sales tax revenue year over year,” Picklesimer explained. “For example, if in October of 2016, they generated $2,000 in sales tax revenue for the city and in October of 2017, they generated $3,000 in sales tax revenue for the city, that would be a $1,000 increase, of which they would get an economic incentive of $500.”

Picklesimer said EBIP is performance-based, and no money is paid upfront by the city.

“If their business does not grow, there will be zero incentive,” Picklesimer said.

“Once (Chelsea Tire) has purchased the building materials for their building and submitted the invoices to the city, then they will get an economic incentive of up to 75 percent of the taxes paid on construction materials,” Picklesimer said.

EBIP requirements stipulate that a business must have a minimum of $50,000 invested in its project to quality, the maximum EBIP incentive is 10 percent of the business owners’ capital investiment and business that do not produce sales tax revenue are still eligible for some construction incentives from the city.

“There are a lot of businesses that don’t produce any sales tax revenue, because there’s no sales tax on labor,” Picklesimer said. “For example, if someone in the medical profession wants to build a new building, they would be able to apply for an EBIP for their construction tax.”

While many Chelsea residents agree with the resolution, others have expressed their reservations about the city’s decision. Picklesimer said he felt the EBIP agreement was explained poorly during the public hearing, which is partially why many people opposed it.

“The way it was presented, this EBIP made it appear that Chelsea Tire was going to get $25,000 upfront from the city of Chelsea. That is not the case,” Picklesimer said. “I personally take full responsibility for the poor presentation of it.”

Chelsea resident Chris Thomas said he believes the EBIP treats other businesses in Chelsea unfairly.

“I have no qualms about helping the businesses and helping the city,” Thomas said. “What I do have a problem with is with there not being an equal playing field. This has not been offered to anyone else.”

While the city was voting on the issue, council member Scott Weygand recused himself because his business sells insurance to Chelsea Tire. Thomas said he believes Picklesimer and council member David Ingram should have done the same.

“What I have a problem with is the mayor proposing this business when it’s public knowledge that they business put money into his campaign,” Thomas said. “This company is also a big supporter of the Chelsea Youth Club, which (Ingram) is the president of.”

However, Picklesimer said Chelsea Tire’s previous donations had no factor in the city’s decision, and any other existing Chelsea business is welcome to apply. Since the resolution passed, Picklesimer said other existing business in the city have reached out and requested incentives.

“Other businesses in Chelsea that now know there is such a program have reached out to me to get details on how they can apply,” Picklesimer said.

Thomas also said residents had little notice of the then proposed resolution before it was passed.

Picklesimer said EBIP has been publicly discussed in the past. Chelsea Motors, LLC is the first business to receive an incentive through the program.

“I talked about existing businesses incentives in both of the debates that we had prior to me being elected. It’s not a new idea.” Picklesimer said. “This is the first one that we’ve actually awarded. Chelsea Tire is the first existing business that requested an incentive, and the EBIP is the tool we used to help them with their business expansion.”

“Also, it was the topic of the Chelsea Business Alliance on Sept. 13,” Picklesimer continued. “It was explained by our attorney, Mark Boardman.”

Picklesimer said the EBIP program serves as a way for the city to foster the development of its current businesses and has economic benefits for both business owners and the city.

“As a city, we are always out trying to find new businesses to come into the city of Chelsea,” Picklesimer said. “If our existing businesses are thinking about doing an expansion, we want them to do an expansion. It’s about encouraging our existing businesses to go, therefore raising their amount of business and the city of Chelsea’s revenues.”

Additional details about the proposal are available online at Cityofchelsea.com.