Small, mid-size and even larger steel-consuming
manufacturers-as well as the local economies in which they
operate-are among the benefactors of tax credits or financial
incentive programs offered by local and state governments, as
illustrated by three case studies.
The first involves Chicago-based Tempel Steel Co., which in
August had considered shuttering its suburban Libertyville,
Ill., production facility and relocating the operations to
Mexico. But with the help of tax credits and other financial
incentives from city and state economic development
organizations totaling up to $7 million over several years, the
company instead agreed to consolidate the suburban operations
at its Chicago facility.
Tempel Steel, which describes itself as the largest
independent manufacturer and global supplier of motor
lamination steels with 2007 sales topping $500 million, was
offered the incentive package only three months after
approaching the City of Chicago and state leadership.
Vincent Buonanno, Tempel's chairman and chief executive
officer, credited Chicago Mayor Richard M. Daley and his office
with providing "the jet fuel for accelerating the permitting
process" and other needed approvals to expand its Chicago
manufacturing facility to relocate the Libertyville operations
Tempel expects to spend between $10 million and $13 million
on the Chicago expansion and Libertyville relocation. By July
2009, the Chicago headquarters will add about 40,000 square
feet of manufacturing space, Buonanno said, and many of the
Libertyville workers will join that operation, doubling the
employee base in Chicago to 700 from 350. "The big decision"
that the incentives provided "was not to take it all to
Monterrey (Mexico)," where Tempel operates a third
motor-lamination plant, he said.
Several factors persuaded Tempel to stay in Chicago,
Buonanno said, not the least of which were the proximity of
steel suppliers and customers and the sophisticated skills that
Chicago's employee base provides, such as technical,
engineering and tool and die experience. Tempel employs die
setters, tool makers and press operators. Even shipping steel
from Indiana mills to Chicago is cheaper than shipping to
Libertyville, he added.
Buonanno praised city and state leaders for fast-tracking
the package that will keep the company in Chicago. "The city is
aggressive. Daley is all over this. He's very ambitious" on
behalf of Chicago business, he said, adding that the mayor's
office removed the red tape usually involved in such
"We are also grateful to the state of Illinois," he said,
which is providing half the benefits in the incentive package.
"Both the city and state responded quickly. They came out for a
tour the next day."
The second case study is Matandy Steel & Metal Products
LLC, a general line carbon steel service center in Hamilton,
Ohio, which announced in August that it had taken advantage of
state and local efforts to revitalize dirty industrial sites
with a plan to build a roll-forming plant for producing steel
studs. Its J.N. Linrose Manufacturing subsidiary is already
making steel studs for commercial building applications in
Under Hamilton's brownfield redevelopment program, the city
received $750,000 from the Clean Ohio Assistance Fund to
acquire the land, raze the shuttered Hamilton Die Cast plant
and clean up the site-a 5.6-acre parcel that Matandy acquired
from the city for $87,300, said Frank Pfirman, the company's
The clean-up of properties through the Clean Ohio program
indemnifies the property owner from legal obligations related
to previous environmental claims, Pfirman said, adding "It's
good for us and it's good for the city."
J.N. Linrose also will benefit from the city's tax increment
financing (TIF) program, which pools property tax receipts for
the improvement of blighted neighborhoods, including industrial
"Our obligation (under the TIF program) is to invest about
$2.2 million," Pfirman said, including $500,000 earmarked for
equipment and at least $1.5 million for the new construction.
Matandy has already purchased $700,000 worth of roll-forming
equipment. The city also mandates that Linrose create at least
10 jobs. Linrose already has 15 employees and expects to hire
more when the new 30,000-square-foot building is completed next
April or May.
The last case study is Genzink Steel Supply & Welding
Co., which in August began receiving state tax incentives to
expand its facility in Holland, Mich.
Working with Michigan Economic Development Corp., Genzink
Steel has committed to create 104 jobs during the next five
years in order to receive $1.1 million in state tax incentives
over a seven-year period and a direct grant of $150,000 for job
The company had considered moving to Houston because it
supplies oil and gas field and coalfield customers, which
remain growth industries, and to serve wind tower manufacturers
in the Great Plains states.
Genzink Steel plans a $7.9-million, two-phase expansion,
said John Maxson, the company's chief operating officer. The
first phase, which could be finished as soon as May 2009,
consists of a 38,000-square-foot addition to house computer
numerical control (CNC) torches and boost welding and
fabrication capabilities. The second addition will be geared
toward training, safety and employee amenities.
The expansion is part of Genzink Steel's master plan "that
targets how our country responds to critical needs, such as
alternative energy," Maxson said. The company also will supply
steel and fabricated steel components to meet maintenance needs
for existing windmills, as well as components used in oilfield
applications, coal mines, industrial facilities and
Wind towers can be 70 feet high and weigh 80,000 pounds.
"They are not easily made or transported," he said, adding that
such heavy fabrication "requires a high skill-set from the
fabricator. That's where training (and grants to fund it) is
vital. Skilled tradesmen are aging in the U.S., so our ability
to train a new generation is key to our future and to how well
the equipment is built."
Genzink has 300 employees, 76 of which were hired during the
past year. "We plan to add 104 (more) jobs in five years,"
Apart from the state's assistance, he credited the City of
Holland and a local economic development organization for
providing further incentives for expansion.
Many of Genzink Steel's customers are in Texas, and wind
power is expanding throughout Iowa, Oklahoma and Texas. By not
relocating to Houston, Maxson was concerned that distance was a
disadvantage. However, "our whole program hinges on skilled
personnel and the ability to manage the subcontracting portion
of the business," both of which he felt would be more difficult
if the company left Michigan. Citing the strength of the supply
chain of machinists in Michigan and neighboring states, he said
that machine shops formerly tied to the auto industry are eager
to do work for growth industries like wind power.
Some energy-related steel suppliers have already moved to
the oil patch, but "they are traveling farther and farther to
find quality fabricators," Maxson said, so staying put "bodes
well for us."