ELKHART — An Elkhart business with roots in the community for 35 years has many reasons to expand locally and one that might cause it to shift operations out of state.
The deciding factor, according to ProAir LLC, could very well depend on finding a quick and acceptable resolution to the lingering commercial compact dispute that has been simmering for more than five months in city hall.
Under normal conditions, expanding locally would be a simple and quick business decision.
The company makes air conditioning and heating systems for specialty vehicles, many of which are manufactured in Elkhart County.
The company is in a growth mode and would like to purchase seven acres of land adjacent to its facility off C.R. 6, said company president Dennis Mitchell.
Company officials have talked with Elkhart County Economic Development Corp. about their expansion plans and a desire to seek tax abatement.
But those plans to purchase land and construct as many as two new buildings are in a state of paralysis as the company waits for the city of Elkhart to develop a long-term policy on how to charge commercial properties outside of the city for sewer service.
ProAir is located just outside of the city limits, but uses city sewer service. The company has about 80 employees and generates annual sales of roughly $30 million.
The company currently pays about $158 a month for sewer service under the expired sewer service agreement. Under the city’s existing compact policy, which is based on 75 percent of assessed value, the monthly bill would approach $1,000.
However, if the company constructs two buildings totalling 100,000 square feet, Mitchell predicts the monthly sewer charges could triple and ultimately cost the company upward of $36,000 a year.
If it expands, the company may hire between 60 and 80 additional workers by 2016.
That kind of investment, though, won’t happen under the city’s existing approach to sewer service.
“We’re not going to pay $36,000 to flush our toilets,” Mitchell said.
While nobody — including mayor Dick Moore — still openly supports the existing policy that would lead to those kind of fees, the dispute is entering a new chapter.
Moore agreed to establish a task force and partially end a moratorium on new connections outside of the city last week after the state legislature agreed to drop legislation that would have expanded the definition of fees that would have opened the door to companies to appeal Elkhart’s compact policy to the Indiana Utility Regulatory Commission.
Although numerous plans have been pitched in recent months, it looks as if the task force will start from scratch.
Among the proposals that have been considered: Moore recently suggested reducing the formula from 75 percent to 50 percent. But many businesses and the Greater Elkhart Chamber of Commerce have urged the city to scrap the assessed value formula and base the policy on either some kind of flat fee or on usage.
“Assessed value is unworkable,” Mitchell said. “It’s a utility. It has to be based on usage.”
With no resolution in sight, the company has begun looking at alternatives as it seeks to expand. One plan involves moving operations to Pennsylvania. Officials have also looked at Edwardsburg, Mich.
Mitchell said other communities are being more accommodating.
“These people will give us an incentive to move the operation, whether it’s Pennsylvania or Michigan, and they won’t give us some ridiculous compact fee,” he said.
On Tuesday morning, Mitchell’s level of frustration sounded as if he’s reached a tipping point.
“We gotta have a decision here in 60 days,” Mitchell said. “This is stalling our company’s growth.”
Moore wants the new policy to take effect in April 2014. Some business owners wonder if the slow pace of negotiations will continue to drag on since the new policy doesn’t kick in for 11 more months.
Moore said the task force will need some time. He said he hopes they are ready to begin meeting by mid-May.
Told of ProAir’s concerns, Moore pointed out in a statement issued Tuesday that the company currently has water and sewer service.
“We would regret losing any company, large or small, but if a company sees no other benefit to being in this area than being connected to a pipe line, then there is no way to keep them here. The area has a lot more to offer than that,” Moore said.
ProAir is one of 75 companies being shifted to the compact policy through an ordinance approved last year. They would join 63 other companies that have been on the policy for years.
Mitchell said the company continues to hope the issue can be resolved, but expressed dismay at how the issue has played out.
The lingering dispute has created a poor business climate for some business and industry.
“It’s terrible,” Mitchell. “There’s no way any company is going to plan any significant growth here in the next 12 months that could fall prey to this compact fee issue.”
Dorinda Heiden-Guss, president of the county’s economic development corporation, said the immediate impact is limited to the outskirts of the city. The issue continues to be a hot topic in business circles.
“It is a challenge in marketing that specific area of Elkhart. “It creates opportunities for companies to look elsewhere, be it within the county, other communities or out of state,” Heiden-Guss said. “It definitely has a financial impact on the financial wherewithal of the county.”