Tax credit approved for new company
Mar 22, 2013 (The Morehead News - McClatchy-Tribune Information Services via COMTEX) --
Rowan Fiscal Court passed a resolution Tuesday to provide a local tax credit for American Stave Company, LLC.
American Stave Company is a subsidiary of Independent Stave Company (ISC) of Lebanon, Mo., which has announced it will invest $7.2 million in a Rowan County stave mill and log yard.
ISC is a major supplier to Kentucky's bourbon whiskey industry and the largest barrel manufacturer in the world. American Stave will purchase and process white oak timber from Kentucky, Ohio and West Virginia.
ISC recently purchased 57.27 acres of land off Cranston Road (KY 377) near Morehead for its facility.
A stave is a wooden slat that is fitted with others to create a barrel.
The new stave mill will be the company's fifth for the purpose of supplying white oak staves to barrel-making plants (cooperages) on five continents.
Brett Traver, executive director of the Morehead-Rowan County Economic Development Council, Inc. (EDC), said the mill will have a workforce of 45 jobs after activation and reach a target of 70 about two years later.
"The tax incentive program is called Kentucky Business Investment Program (KBI)," Traver said. "It's a 10-year program from project activation. It's when the company starts to recoup its investment or approved cost. In this case, through that program it was $950,000 over 10 years. The company can recoup $95,000 each year."
Since the Fiscal Court agreed to forego the occupational license fee, the company will get a 100 percent credit against its state corporate income tax liability. Also, it will have a wage assessment.
"That's where the company gets to keep up to 4 percent of its payroll," Traver said. "How that works is, the state matches on a three-to-one basis of the personal income tax that they withhold, depending on what the county decides to forego on its local occupational license fee. What Fiscal Court approved Tuesday was forgoing 1 percent, which is what they levy against the people that work there."
Traver said the state will add 3 percent, making the company able to keep $95,000 a year for 10 years.
"The employee bears no burden," Traver said.
Kentucky residents pay a personal state income tax of 6 percent. Rowan County residents who work in the county pay 1 percent of their income to the county.
"In this instance, 3 percent of the state tax and 1 percent of the county tax is staying with the company but it's as if the employee gets a 100 percent credit, as if they have paid it," Traver said. "So, if they're due a state income tax return, they still get that. The burden doesn't shift. It's not like the employee is paying the company to work there."
Traver said the company essentially will have a "reverse savings account."
"They're starting with an incentive amount that they got approved for and their job is to create jobs and make money," Traver said. "By doing that, they can draw that balance down to zero and put it into their company treasury."
Judge-Executive Jim Nickell told the Fiscal Court members that the county offers the same incentive to all prospective new businesses.
American Stave will be located at 4530 Cranston Rd.
Traver said the log buying yard will be established soon, now that the property purchase has been completed. Construction of the stave mill will begin afterward.
He expects the mill to be open next year.
The company's employee salary target, including full benefits, would be $30,000 yearly.
Traver said the company has to be within 90 percent of its employment targets to be eligible to recoup a total of $950,000.
Nicole Back can be reached at email@example.com or by telephone at 784-4116.
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