Macy's to get at least $10 million tax break on distribution center

December 16, 2010|By MATTHEW UMSTEAD |

MARTINSBURG, W.Va. — Macy's Inc. stands to receive a tax break worth between $10 million and $11 million if the department store giant follows through with its plan to build a $150 million distribution center in Berkeley County, officials said Thursday.

The Berkeley County Commission Thursday approved an agreement that delays Macy's obligation to pay taxes in full until after a Payment In Lieu of Taxes agreement - worth $11.25 million to the county - expires in 2028.

Macy's said it needs the distribution center to meet growing Internet sales in the eastern United States. The 1.3-million-square-foot facility is tentatively expected to be built in Cumbo Yard Industrial Park north of Martinsburg, near W.Va. 9 and Exit 16 of Interstate 81.

The fulfillment center is expected to start operations in 2012, but Macy's isn't scheduled to begin making a series of fixed payments in lieu of taxes that would ordinarily be assessed until 2019, according to the agreement.

The payments spanning nine tax years begin at $1 million and gradually climb to $1.5 million before the county's agreement with Macy's ends in 2028.

The up-front tax break for the company is in addition to the $7.3 million incentive package that the state put together to help lure Macy's to the Eastern Panhandle, according to the West Virginia Development Office.

 The state agreed to loan the Berkeley County Development Authority $5 million to prepare Macy's distribution center site and also will provide $1.8 million for job training through the Governor's Guaranteed Workforce Program, according to information released by Mark R. Julian, WVDO's business and industrial development director.

A $500,000 investment in the state's Community and Technical College system will assist Macy's with start-up training at the company's future facility, according to Julian.

Commissioner William L. "Bill" Stubblefield said the incentives were necessary in a tough economic environment to ultimately edge out more than 100 other possible locations for Macy's investment.

"We never would have gotten this unless we were competitive," Stubblefield said.

New York, one of West Virginia's major competitors for the project, was still trying to win the investment as recently as Sunday by sweetening their offer, according to Stubblefield and County Commission legal counsel Norwood Bentley.

While some skeptics might view the tax break as a giveaway, Stubblefield said he expects the majority of the jobs to be filled by Berkeley County residents and that any increased need for education and law enforcement services would be minimal.

"Our people will match these skill sets," Stubblefield said in Thursday's commission meeting.

Macy's has said it plans to hire 1,900 full- and part-time employees, but the agreement only requires employment levels to eventually reach the full-time equivalent of 600 workers within the last few years of the deal to  continue to qualify for the tax incentives.

The company's payroll for the operation is expected to be more than $30 million.

The county's agreement, which actually is with Macy's Corporate Services Inc., a Delaware-based corporation, is allowable by state law because Macy's is expected to immediately convey or transfer the land it buys from the Berkeley County Development Authority to the West Virginia Economic Development Authority and then lease it back from the state, Bentley said.

At the end of what Bentley said is a 15-year lease, Macy's would be entitled to purchase the land back from the state for $1 and taxes would then be paid in full.

Stubblefield said he hopes Macy's will help bring in more companies who see Berkeley County was able to "pass muster" with one of the nation's leading retailers after a very thorough review process.

Macy's didn't just come to Berkeley County one day and say, ‘You look like nice people, we're going to locate here,'" Stubblefield said.

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