Columbus McKinnon Corp. is getting an extra $51,000 in sales tax breaks through the Amherst Industrial Development Agency after the Amherst material handling equipment maker determined that its project to build a new headquarters and training center would cost more than initially expected.
The additional tax savings are on top of tax breaks totalling $1.3 million that the agency approved for the project last August.
At that time, Columbus McKinnon expected it to cost about $5.9 million to build its 30,000-square-foot headquarters and training center at 205 Crosspoint Parkway. But since then, with design work now completed and final cost estimates in hand, the company believes the project could end up costing around $6.5 million.
The company, which said it expects to hire 10 additional people for its 130-person local work force within three years, had considered sites in North Carolina for the project, which will give Columbus McKinnon the ability to do research and development on new products.
While it is not unusual for IDAs to increase the projected value of a project after its initial approval, agency officials said Friday that they believed the state IDA reform legislation that took effect in April 2013 is encouraging companies to low-ball their initial cost estimates.
The state law gave IDAs the ability to clawback tax breaks that were granted to projects that fail to come within 80 percent of their job and investment projections. By being conservative in their cost and job estimates, companies seeking IDA tax breaks are able to set investment and employment targets that will be easier to meet and less likely to be subject to the clawback provisions, said James J. Allen, the Amherst IDA’s executive director.
“Nobody wants to be subject to a clawback,” Allen said.
In the past, a company might have estimated a project’s cost on the high side to build in a cushion in case of cost overruns. Regardless of the estimate, the company only receives sales tax breaks based on their actual spending as the project is carried out, not on the original estimate, said Nathan Neill, the IDA’s attorney.
But the estimate does serve as a ceiling for the total tax breaks a company may receive, so if the estimate is too low, the company must return to the IDA, as Columbus McKinnon did, and get its approval to revise the cost estimate upward in order that all of its material and equipment purchases are covered by the sales tax exemption.
“With all of these restrictions we are putting on companies, sometimes it forces them to come back for an amendment,” Allen said. “The whole thing about clawbacks is that it causes them to be very conservative in what they’re asking for.”