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June 24, 2008 - 7:13PM
Our View: Annex deal is win-win for Mesa, large employer
Tribune Editorial
For more than 40 years, Empire Southwest has grown with Mesa and became one of the country's largest dealers of Caterpillar equipment. From its headquarters at U.S. 60 and Country Club Drive, Empire has been active in the community but never really joined it, as Empire's property wasn't annexed and remains a county island today.
Mesa provided water, natural gas and fire protection for a fee, but has never collected any sales taxes from all of those dirt movers and other equipment that moved through Empire's doors.
This arrangement has worked for both Empire and Mesa until recently. We all know how much Mesa's budget could use a new infusion of tax revenues. But for Empire, the question is what's the next step for this family-owned business and its 1,000 employees?
Chris Zaharis, Empire's executive vice president, told the Tribune's Misty Williams that his company wants to build a new training office and a parts distribution warehouse with modern technology to better manage a $60 million inventory.
The best option would be for Empire to just add on at its current location. But that would require Empire to expand onto property within Mesa's city limits. This raises the concern of whether Mesa could expect to start collecting sales taxes on Empire's transactions.
Rather than get bogged down with lawyers and possible court wrangling, Zaharis said, Empire sought a new deal with Mesa that would satisfy everyone. As Williams reported Saturday, Empire has agreed to have its entire headquarters annexed in exchange for a partial sales tax rebate when its annual sales exceed $75 million. The rebate is relatively small, 6 cents for every $10 in sales or 34 percent of the total paid, and would end after 15 years.
This deal lets Mesa keep one of the East Valley's biggest employers (with average wages of $75,000) and the city could collect $1 million a year in new taxes. In any case, the city won't be holding the bag for any unusual expenses if Empire doesn't perform as expected.
In fact, such rebates could work out so well that Mesa should consider routinely offering them to retain companies and to recruit new ones.
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