Atmel Corp. is in the midst of a $25 million expansion, and wants the city to reinstate its personal property tax rebate — and to do it retroactively.
The details of the agreement: Atmel wants a 10-year agreement to receive rebates on its business personal property taxes and alternative rate of tax on machinery. Under the terms of the agreement, the city will rebate 50 percent of its portion of the business personal property taxes for equipment that cost between $1 million and $5 million. It would receive a 90 percent rebate on investments higher than $5 million. The taxes for machinery will be reduced incrementally up to $5 million and purchases of more than $20 million are not taxed at all.
What makes the Atmel agreement different — it’s retroactive. The company would receive a rebate for any personal property or machinery purchased since January 2011. That prevents a gap between the new economic development agreement and the one that expired, said Bob Cope, Colorado Springs economic development director. It would cover capital purchased in 2010, and reported on 2011 taxes.
In exchange, the company promises to keep at least 1,300 people employed at the facility and to make the promised upgrades to its current plant.
The City Council will discuss the proposal at the March 27 formal meeting to grant Atmel an exception to a city law that says corporations can only receive the property tax rebate for 15 years. Atmel’s 15-year rebate ran out in 2009.
Cope told city council last week that the proposal made economic sense. Atmel currently employs 1,330 people, and supports about 2,000 indirect jobs as well.
Atmel designs and manufactures microcontrollers, touch solutions, advanced logic, mixed-signal, nonvolatile memory and radio frequency components — in other words, high-tech, high-paying jobs. The company was founded in 1984 and has 5,100 employees worldwide.
In the Springs, Atmel’s manufacturing plant is at 1150 E. Cheyenne Mountain Blvd. It has 425,000 square feet of building space on 50 acres. In the next five years, the $25 million expansion includes technology and capability upgrades.
Cope told the council that the 10-year wage impact from Atmel was estimated at $1.9 billion, and the 10-year city sales tax revenues — from people spending salaries inside the city limits — is estimated to be $19 million.
And, according to Cope’s pitch, the city doesn’t stand to lose much either. The presentation made to council shows that the city will give Atmel $295,047 in business personal property tax rebates and $44,023 in rebates on machinery.
The proposal has “minimal financial risk,” Cope said, “because, it’s performance based, and is rebated to the company only after its collected.”
The roughly $339,000 is only 1.1 percent of the $31.2 million that Atmel generates for the city in the form of sales taxes and about $12 million in fees to Colorado Springs Utilities as its largest customer.
Only one city council member asked a question about the deal. Angela Dougan asked if the city had done any studies about how much it would cost a company if it moved its facility out of the Springs.
“No, we’ve never done that kind of analysis,” Cope said. “We just did the analysis for how much they provide to the city.”
Council member Tim Leigh doesn’t think there should be any discussion. He recommended that the city staff put the item on the consent agenda.
“This makes sense,” he said. “We’re not giving anything away, but we do stand to get a return on the investment. The numbers are what the numbers are — and we stand to gain more from doing this.”
Leigh said the city should not stand by and let the economy falter.
“You can make deals like this — give personal property tax rebates — because we stand to gain with employment and in sales taxes and with Colorado Springs Utilities. Make a deal like this, and the economy will grow. Or, you can stand back, and let it shrink.”
Leigh said the city isn’t in the business of handing out cash incentives to business. He isn’t in favor of those kinds of deals.
“You can’t buy loyalty,” he said. “New Mexico was writing checks for millions and millions for businesses to move there. But there’s no loyalty. As soon as the next pretty girl comes along, they’re gone. But the tax rebates to businesses that are already here — that makes sense.”
The Atmel deal is the latest in a string of business property tax rebates the city council has given. Last year, the city council approved a $4.5 million deal in sales and business personal property taxes for Wal-Mart, in an agreement that the retail giant will build a data processing center in the Springs. That deal is expected to bring $488 million into the economy during its first 15 years, according to economic data from the city.
The city also gave Agilent $656,000 in incentives last year. The technology company plans to build a $121 million, 55,000-square-foot expansion at its campus at Garden of the Gods Road. The company will add 131 employees in 15 years.
“I guess the big difference is you have people in office now who are business people, who know a good deal,” Leigh said. “We’ve gotten away from those esoteric, philosophical conversations — and we’re making things happen.”
But Atmel isn’t promising any new jobs — in fact, it was hard hit by the recession. The company laid off 245 people in December 2008 and 266 people in April of 2009. Before the layoffs started, it had 1,700 employees.
As recently as November 2011, the company announced that it ended the contracts of an undisclosed number of temporary workers, saying it was responding to slower sales and a weakening world economy.
Its latest financial figures are also murky. The company reported a 20 percent decrease in fourth quarter revenue from the third quarter and a 16 percent decrease from the fourth quarter of 2010. However, for the full year, the company reported a 10 percent increase in revenue, to $1.8 billion, compared to $1.64 billion for 2010.
“Despite the macroeconomic headwinds that affected the entire industry in the fourth quarter, I’m pleased with the overall results and progress we made across all of our business segments during 2011,” said Steve Laub, Atmel’s president and CEO in a press release about fourth-quarter earnings.
Atmel’s local director, Dan Malinaric, did not return phone calls about the planned expansion or the request for rebates for business personal property taxes and machinery.