By CARLY GRADY
Manufacturers in Emerson, Ga., are relying on local voters to pass the Freeport Tax Exemption on Nov. 6 to help their companies compensate for the recent property tax inflation. However, most voters are unaware of what the exemption means.
A Freeport Tax Exemption provides a tax break on manufactured inventory at the end of the tax year.
Emerson’s millage rate, a property tax which is expressed as one tenth of a penny, has recently risen from 0 mill to 2 mill due to the current slump in the economy. This economic downturn has forced the city to re-institute the millage rate to balance the budget.
The millage rate increase has encouraged the mayor and city council to introduce the Freeport Tax Exemption Referendum in hopes of helping the local manufacturers compensate for the millage rate increase.
“The mayor and city council wanted to get something on the books to help them out and keep them in the community,” said Emerson City Manager Kevin McBurnett.
The Freeport Tax Exemption will offer manufacturers, distributors, wholesalers and warehouse operators inventory tax exemptions in the following three categories:
- Manufacturer’s raw materials and goods that are in the manufacturing process.
- Finished goods held by the distributer, and manufactured goods destined for out-of-state shipments.
- Finished goods held by the original manufacturer.
All three of these categories will be voted on separately.
“By approving the Freeport Exemption, Emerson residents are going to keep the business in this community; we won’t be at an economic disadvantage. We will be able to attract businesses to this community,” said McBurnett. “We will be able to keep them here and provide jobs and income for our tax payers.”
Georgia law gives local officials, counties or cities, complete control of implementation, inventory categories and levels of exemption. While Emerson may be part of Bartow County, the exemption will only pertain to the city of Emerson. Emerson is home to 1,498 residents and is located 45 minutes north of Atlanta.
Other cities in Bartow County, including Cartersville and Adairsville, already have a Freeport Tax Exemption in place. Cartersville has an exemption of 40 percent and Adairsville has an exemption of 80 percent.
“If you look, the surrounding counties all have it and I’m not saying we should have it just because they do, but there’s a logic to it that says we’re encouraging businesses because we’ll make money from a lot of things from the business, not just from them having inventory here,” said Emerson City Council Member Ed Brush, a previous employee of Enforcer, one of the largest manufacturing companies in Emerson.
Vote on Approved Referendum
To put a Freeport Tax Exemption in place, a three-step process must be followed.
First, local governing authorities must approve a Freeport Tax Exemption Referendum before it can be voted on by local citizens. A referendum is a direct vote by all members of the council, who are asked to either accept or reject the proposal. Last month, members of Emerson’s City Council unanimously approved the referendum.
Second, the referendum will be placed on a ballot to be supported or declined by local voters. The Emerson Freeport Tax Referendum will be placed on the Nov. 6 ballot. If voters pass the referendum, this will be the first Freeport Exemption in Emerson.
Third, if the referendum does pass, it will go back to city council members who will set the level of inventory to be exempt, from 20 to 100 percent. Implementation of 20 percent increments may be phased in if desired by officials. Levels may also be reduced, but only after a 10-year exemption process.
Emerson Mayor Al Pallone is mindful that many voters are unaware of what the Freeport Tax Exemption is and how it could potentially affect the community, bringing in jobs and helping keep employers in Emerson. He believes this is especially important because Bartow County has one of the highest unemployment rates in this part of the state.
“It will increase the tax digest so their property tax will still go up, but if you don’t bring these places in, yeah, you won’t get the taxes from their inventories, but they also won’t get the increased property value in that area,” said Pallone.
An increase in property value is one thing that Doug’s Place Restaurant owner Melissa Ferguson is worried about. Her restaurant has been a local hot spot for 17 years and the building itself dates back to the 1890s.
“If it’s going to raise the property value, then I’m going to be paying more on my taxes,” said Ferguson. “But I guess I would be for it, just because they say it helps and all.”
If the exemption passes, manufacturing companies will be able to use the money they save on it to pay off their increased property tax.
“Three businesses, Zep, Beverage House and AMrep will be affected tremendously by this, to the amount of probably $20,000 or less a piece,” said McBurnett.
Zep Superior Solutions, previously Enforcer, is one of the companies affected by the millage rate increase. The Emerson business employs 140 full-time employees and 30 to 170 temporary workers on a weekly basis; almost all employed are local residents.
Zep Plant Manager Steve Kullberg is worried that there are a few issues that need to be overcome pertaining to the Freeport Tax Exemption. The first issue is that people don’t really understand the exemption.
“I hadn’t ever heard anything about it,” said Teresa, who asked that her last name not be given. Teresa has lived in Emerson for over 20 years.
Kullberg is also concerned that the referendum may be misunderstood.
“It sounds like one of these corporate tax breaks, so you would say ‘Oh, why should we give them a break,’” said Kullberg. “The Freeport is not attempting to give us some kind of break, it is trying to equalize it because of the current millage rate increase.”
What Makes Good Business Sense
As a manufacturer, Zep is constantly being evaluated at a cost perspective. Zep is a large company with other facilities in other parts of the area; Kullberg points out that a higher taxation rate may force him to reduce the amount of goods stored in Emerson, thus cutting the number of employees needed at the Emerson plant. Kullberg explains how there is nothing mean or malicious behind the idea, just practical business.
“If I can do the same thing in two places, I’m going to it where it is most advantageous,” said Kullberg.
The Zep facility has been located in Emerson since 1984 and has undergone about seven major expansions, increasing the square footage from 14,000 to a little more than 390,000 square feet. Zep is a global company that was founded 75 years ago.
Last year, Zep grew 20 percent resulting in many new jobs and plant expansions. The company is currently at a transition point as a business. Kullberg says Zep has outgrown its current site with almost as much rented off-site property as owned.
With no room to grow the plant manager has to decide whether to relocate the facility or relocate part of the operation out of the area. The choice will be somewhat predicated on what happens with the Freeport tax.
“Twenty thousand dollars is not going to make the decision,” said Kullberg. “But it is a contributing factor.”
For more information on the Emerson Freeport Tax Exemption, call Emerson City Hall at 770-382-9819 or visit their website emersoncityhall.com.