(Brief) History Between Severstal Steel and City of Dearborn

In anticipation of the upcoming study session on the Severstal money and city hall issue, it would make sense to get a little background on the relationship and history between Severstal Steel and the City of Dearborn.

At the outset, I want to be clear that this issue is not about making Severstal out to be a bad company. People have expressed their concerns to me that the attention on this issue could harm the current relationship or future possibilities of donations or agreements between this and other companies and Dearborn. That is certainly not my intent. I have tried to be careful to emphasize this issue is about the decisions our city leaders make when they have the ability to direct money, and shed light on the process of that decision in this instance, not pass judgment on the company behind the money. If anything, I hope this helps to facilitate greater opportunities between Dearborn and its community partners because there will be greater communication and resident input as we move forward.

So, here is a brief overview on the history of Severstal in Dearborn, which helps inform us on the history of the agreements in question. If you have any additional facts or insight, please feel free to share!

Severstal North America (Severstal NA) is a wholly-owned subsidiary of Russian-based OAO Severstal. Severstal is a vertically integrated steel and steel related mining company. Its North America corporate headquarters is in Dearborn, and they also have a new electric arc furnace operation in Columbus, Mississippi.  In addition, they have three joint ventures in the U.S.; Mount Stain Carbon, LLC in West Virginia, Double Eagle Steel Coating Company in Dearborn, MI, and Spartan Steel Coating, LLC in Monroe, MI.

The Dearborn facilities are located at the Rouge Complex. It was acquired in 2004 by OAO Severstal and later renamed Severstal Dearborn.  At that time, Severstal challenged the taxable value of the Rouge property, and initiated an appeal. The City of Dearborn disagreed with the appeal, and both parties came to an agreement on the valuation of the property (Agreement 1 2005).  This was the same agreement that created a profit sharing plan, as well as support from the City of Dearborn for an application for State Industrial Facilities Exemption Certificates (Agreement 2 – 2005). Since then, Severstal completed a $1.5 billion dollar expansion to update and modernize the steel production capabilities at Severstal Dearborn, as well as increase jobs. The company received tax credits from the Michigan Economic Growth Authority, including a $10 million Brownfield tax credit. It’s completed upgrades were celebrated by all of Michigan in 2012.

Severstal Dearborn has been an active and involved community partner. In 2011, it raised $15,000 for new playground equipment in Dearborn,  which created a new playscape at Morningside Park. Recently, Severstal was named Business of the Year by the Dearborn Chamber of Commerce, and Severstal employees raised $2,200 for the annual Mutt Strut event for the Dearborn Animal Shelter, and turned around and donated 7,000 pounds of food for the shelter food drive.

In 2009, Severstal and the City of Dearborn agreed to release the earlier 2005 agreement, in a new Contribution Agreement (Contribution Agreement 2009). This provided for Severstal to pay $8.5 million to Dearborn to build a convention center. The agreement terminated in 2010 when no work on the center had begun. Recently, Dearborn indicated that Severstal wanted to make an $8.5 million donation to Dearborn to use to move its City Hall. This leads us to where we are today, and to questions about the flexibility of how this money can be spent. Many questions have been raised about the status of the 2005 agreement after the 2009 agreement terminated, and the policy considerations behind approving the City Hall project at all.

So, I hope we can agree that these questions would be raised regardless of who is writing the check. It’s not about name-calling, spreading lies, or damaging anyone’s reputation. It’s always been about open communication, public involvement, and ensuring the best decisions are made for the future of Dearborn.

I believe everyone involved has Dearborn’s best interests at heart, and we are lucky to have companies like Severstal to help us achieve our potential.

Check back tomorrow for a post on some of the more specific questions on these agreements and a discussion on what our options might be, to help with the conversation at the study session. The study session is Thursday, June 20th at 6pm in Council Chambers at Dearborn City Hall. Please feel free to join my group on Facebook or comment here with any questions or comments you have.

Study Session Scheduled!

This post is a few days late but I still wanted to get it out there! The study session on the issue regarding the Severstal money is scheduled for June 20th at 6pm. It will be held in the City Council Chambers at City Hall. I hope to see you there!

Revealing Reality – Severstal Money Overview

“The reality will be revealed when everyone has it in front of them.” The Mayor said that at the May 14, 2013 council meeting when the Severstal issue was first tabled. After reviewing the response to my Freedom of Information Act (FOIA) request, questions remain but one thing seems pretty clear:

No agreement currently exists that binds the city to use Severstal’s money on a specific, named project. 

There is a lot of information that brought us to this point, and I did my best to summarize it here for you. This post will be followed by other posts digging deeper into the documents, background, and questions raised. The study session has been scheduled for June 20th at 6pm and I want to make sure that June 20th is not simply the beginning and the end of the conversation. I want to ensure that your voices are heard.

This all started most recently when the council was going to vote to accept money from Severstal Steel, and then allocate that money specifically as follows:

• $5 million on the City Hall move
• $1.5 million on a “Severstal Veteran’s Park,”
• and donate Artspace a total of $1.795 million for their purchase of our City Hall.

In response, we packed the council chambers with concerned residents, and it was ultimately pulled from the table, pending a study session on the issue. At that meeting, the Mayor indicated that the money was related to an agreement with Severstal that went back to 2004/2005, that it had been revised and that the money had to be used in the way Severstal wanted.  After that meeting, I submitted a FOIA to Dearborn for “agreements, contracts, and/or settlements related to a payment in lieu of taxes, gift, or donation from Severstal to the City of Dearborn, since 2004.”

Here is a summary of the documents I received, along with a bit of background on them that I got from a conversation with Corporation Counsel, Debra Walling, about the issue.

Agreement 1 2005 -  This was an agreement entered into on May 25, 2005 between Severstal and the City of Dearborn. It addresses a couple of things. Around 2005, Severstal purchased the Rouge Steel plant in Dearborn. At that time, Severstal had petitioned to have the assessed valuation of the property lowered. Dearborn objected and believed the property valuation was correct. This agreement secured the valuation of the property at $35,000,000 for the 2005 Tax Year (from $46,526,300), and included a bunch of stipulations and terms as to how/if that could be increased and how it would work (for a later post). It was to last 12 years, or until the profit sharing obligation ended. At the same time, Severstal wanted Dearborn’s assistance in applying for Industrial Facilities Exemption Certificates for anticipated construction projects, which Dearborn agreed to do in this and in what I’ve saved as Agreement 2 – 2005.

Agreement 1 also created a profit sharing plan, based on the UAW hourly profit sharing agreement formulas, which was in place in 2004. This is described in Exhibit C of the document. It was created:

“in recognition of the fiscal and economic implications of the foregoing reduction in assessed and taxable value of SNA Property…SNA shall make payments to the City in amounts determined by a formula related to the success of the steel producing operations of SNA conducted specifically in Dearborn.”

In 2009, the city entered into the contribution agreement below. Debra Walling described it as a buyout of the profit sharing agreement as it stood at the time.

Contribution Agreement 2009 - This was entered into on August 14, 2009 and provides that Severstal would pay $8.5 million toward the construction of a Conference Center in Dearborn. The agreement is very clear that the money may only be used for construction of the Convention Center, and even lays out a tight deadline for when the money must be paid, such as $285,000 to Ghafari Associates within 10 days of the execution of the Agreement for concept floor plans and other drawings, then $2 million when they can start pouring concrete, $2 million when construction is more than 1/3 completed, and so on.

In addition to the terms for payment, the 2009 agreement released Severstal from the profit sharing obligation agreed to in 2005. Here is the section that happens in:

3. Further Appreciation. In appreciation for Severstal’s commitment pursuant to this Agreement, the City relinquishes any rights to and releases Severstal from any obligation for payment of any amounts that might be otherwise required to be paid under any prior agreement between Severstal and the City related to the settlement of certain property tax cases pending in the Michigan Tax Tribunal for tax years prior to 2008 other than ad valorem property taxes or industrial facilities taxes as presently assessed.

What does this mean? It’s not quite a Payment in Lieu of Taxes (PILOT), in the traditional sense, but we weren’t completely off the mark. Instead, it’s like a buy-out of the obligation from 2005 to share profits. This agreement would take the $8.5 million, use it in this specific way, and then release Severstal from the remaining 8 years (at that time) left in the 2005 agreement. I have done some initial research on profit sharing plans and scoured the agreement.  It does not state how the profit sharing money must be used or where it goes. Logic tells me that if it is not spelled out where to put the money, it would just go to the City’s General Fund. For example, here is an article of a city that gets profit sharing from a hotel, which goes to their general fund. That conclusion is my own with what I know now, so please share any insight you have on it!

The agreement also provided for this little gem, naming the Conference Center for Severstal:

B. Dearborn shall cause the Conference Center to be named to acknowledge Severstal or a person designated by Severstal (subject to the City’s reasonable approval) with signage designating the facility as “Severstal Conference Center” or such other name as shall be reasonably acceptable to both Severstal and the City, together with a plaque or other suitably displayed commemoration of Severstal’s contribution. Severstal shall be given the right to reasonably review and approve the form and wording of such signage and commemoration.

The agreement also states in multiple places that it may only be changed in writing, and includes a termination clause:

“[u]nless the Mayor and an authorized Severstal representative otherwise agree in writing to an extension, if construction has not started on the Conference Center and Severstal and the City have not agreed to an alternative use of Severstal’s funds by April 1, 2010, this Agreement shall terminate and all rights and obligations under this Agreement shall terminate.”

Since the Conference Center did not begin construction, this agreement terminated on April 2, 2010. Debra Walling confirmed that it terminated and that, while they are currently in negotiations, there was no extension or new agreement formalized since the 2009 agreement terminated. It’s my understanding that we have simply reverted back to the 2005 agreement. This means Dearborn is not bound by any agreement to use this money in any specific way, or to agree to terminate the profit sharing early. Whether we should or should not terminate the profit sharing agreement or how we should deal with that is an issue we definitely need to delve into further.

But, the point now is that there is nothing that binds the City of Dearborn to spend $8.5 million from Severstal on a move to a new City Hall.

None.

So, where are we now? 

At the May 14, 2013 council meeting, the Mayor said this money is a donation, that Severstal controls it, and if we choose not to take the money, we lose it. We now have the documents and the ability to determine if this is true or if there are other options for Dearborn.

Together, we will work through the agreements, background, and issues in much more detail leading up to the study session on June 20th. I look forward to sharing knowledge, answering questions, and having an honest conversation about what we think is the best course for Dearborn. I don’t know what the answer is yet, but it’s a decision we should all be a part of and I am glad for the opportunity to bring the voices of Dearborn residents to the table.

Comment here and join my Facebook groups – both Kristyn Taylor for Dearborn City Council and Dearborn Residents for Accountability or even send me an email (kristyn.taylor2@gmail.com) to talk more!

Endorsement from Dearborn Resident and Activist Morris Goodman

I wanted to thank Morris Goodman for his raving endorsement of my campaign. I have known Morris as a Dearborn Democrat and a local commentator for a few years. I was humbled when he contacted me to include me in his top picks for Dearborn City Council. Here is a link to the article.

Also, don’t forget to join my group on Facebook today!

Let’s Go On a Neighborhood Tour!

Dearborn is a city made up of many neighborhoods. Each one is unique and deserves attention. When I go on a run through my neighborhood, there is always something new I notice, some beautiful landscaping, or new problem in the sidewalk that I didn’t see before. In Dearborn, we all care about the value of our property and the quality of our neighborhoods. We are each so familiar with all of the braggable elements and not so exciting aspects of our own neighborhoods, but it can be easy to overlook those parts of others.

So, I want to walk with you through your neighborhood to see it from your perspective.

I want to help you celebrate the treasures in your neighborhood, and fix the blemishes. If we increase the value and preserve the character of each Dearborn neighborhood, we will increase the value and preserve the character of Dearborn.

Stay tuned for a schedule of the neighborhood tours. I hope you will join me and help me see your neighborhood through your eyes.

Join my group on Facebook, today!

Then, vote for me, Kristyn Taylor, on August 6th for Dearborn City Council, so I can bring your voice to the city table.

Interview with the Arab American News

Last week, I was interviewed by the Arab American News and featured on their website. It’s a great article, please take a second to read it.

During the interview and in many conversations afterward, the topic of how to better engage residents with the City of Dearborn came up. I know and have often discussed many of my experiences in which I was frustrated by the lack of information, access, or other engagement opportunities. I want to hear about yours as well.

When have you wished you were better able to engage with the city? Tell me about the experience and what you wished it was like instead.

Please also join my group on Facebook where we are having a similar conversation.

My Interview on WHFR

I was interviewed by Jay Korinek and Dennis Rymarz of WHFR’s “The New WHFR Journal” this afternoon. I talked to them about the recent City Council meeting where they tabled the Artspace and $8.5 million issues, as well as why I am running for Dearborn City Council.  My time there flew by but it was great to talk about the issues and get my message out.

Here is a link to the podcast. Please listen and give me your thoughts on how it went!

Also, join my group on Facebook today!