May 7, 2009
SC Johnson, Becker traded tax-exempt status for Uptown cash
SC Johnson's response to RacinePost's stories.
So what's the big deal about SC Johnson getting two of its signature buildings taken off the tax rolls?
Commenters have pointed out SCJ is a valuable corporate citizen that provides millions of dollars directly and indirectly into the local economy. A minor tax break for two buildings designed by the great Frank Lloyd Wright doesn't seem like much of an issue.
But there's more to the story.
SC Johnson received the tax-exempt status by swinging a deal with former Mayor Gary Becker. Becker agreed to support SCJ's request to Gov. Jim Doyle, and SCJ agreed to donate $100,000 a year for five years to the city's Uptown program.
The deal was in place by late 2007 and went into affect when Doyle issued an executive order on Jan. 10, 2008 naming SCJ's Administration Building and Research Tower historic landmarks, according to our sources. The executive order, which made the buildings exempt from property taxes, also included the two new buildings being built as part of Project Honor.
City Development Director Brian O'Connell said in an interview Friday that he was involved in part of the agreement. First, SC Johnson officials told the city in 2007 it was pursuing a property-tax exemption from the state for its Wright-designed buildings. State law specifically allows Wright buildings to go tax free with an executive order from the governor.
"It could have been done without city consent," O'Connell said.
The city wrote a letter to the governor saying it would not oppose SCJ's request to make the buildings tax exempt, O'Connell said.
According to a second source, who requested anonymity, Becker supported SC Johnson's request because the company offered the five-year, $500,000 grant for Uptown. By Becker's reasoning, the source said, the deal was OK because SC Johnson was getting less in return than it was giving - for five years. SCJ will save at least $25,000 a year in property taxes (a lot more once Project Honor is complete), but it's paying $100,000 to the city.
Under the deal, the Racine Unified School District, Racine County, Gateway Technical College and the state (who all receive a portion of local property taxes) receive nothing despite losing SCJ's buildings from their tax rolls, as well.
O'Connell said SC Johnson has yet to make its first $100,000 payment to the city. The final details on the five-year grant are being worked out, he said. The first payment will go toward renovating the facade of 1418 Washington Ave., he said.
O'Connell said he was not part of any talks between Becker and SC Johnson about the tax-exempt status, and couldn't comment on whether there was an explicit deal to trade the city's support for the governor's executive order for the $500,000 Uptown grant.
But our second source said there was an agreement between Becker and SCJ to swap the tax-exempt status and the Uptown money. Becker felt he had to offer SCJ something in exchange for the money needed to kickstart the Uptown artist program, our source said. So he agreed to support the company's request to the governor.
"He was looking for a quid pro quo on this one because of the money he wanted for Uptown," the source said.
O'Connell said he didn't know if Becker ever considered bringing the city's support of SC Johnson's historic status to the City Council. But the SC Johnson grant was brought before the city's Redevelopment Authority on Oct. 1, 2008. The money can be used to improve public safety, to renovate facades on RDA-owned buildings, to conduct design services, to renovate the residential neighborhood and to market the artist relocation program.
While Becker may not technically have had to bring the deal with SCJ before the council, our source said the deal may not pass the "smell test" for ethical government.
Becker was the type of mayor who got things done and worried about the repercussions later, they said. In this case, he needed seed money for the Uptown project so he made a deal with SCJ.
Under this scenario, SC Johnson actually went out of its way to help the city. The company, which has spent millions maintaining its Wright buildings, likely could have gotten its buildings exempted from property taxes without paying any money to Uptown. Instead, the company engaged the city and worked out an agreement.
But the deal will cost the city, Racine Unified, Racine County and Gateway in the long run. SCJ may pay around $25,000 in taxes on its current buildings, but its new Project Honor buildings will be worth upward of $20 million - millions that are now off the tax rolls forever.