Plant closing

LSC Communications will be closing its facility at 2500 Marion Drive in Kendallville. The plant, which has been the site of numerous multimillion-dollar expansions over the past decades, will let go of all 307 employees by Dec. 23.

KENDALLVILLE — The closure of LSC Communications’ book binding plant in Kendallville this year could result in local governments losing tens of thousands of dollars in property taxes if equipment is pulled out of the facility.

Or, if everything stays put, even while the building is shuttered, there may be little to no impact on local government coffers.

Gauging exactly what the impact will be when LSC Communications closes its 2500 Marion Drive plant by Dec. 23 is tricky, because it’s unclear exactly what will happen with the building once closed and how much taxing value is specifically in that facility, one of two LSC operates in the city.

On Sept. 1, LSC Communications, formerly known as Courier, issued a WARN notice to the state, indicating that it would be permanently closing its facility at 2500 Marion Drive, resulting in all 307 employees being let go between Oct. 1 and Dec. 23.

The notice also included information that LSC’s digital printing plant and warehouse, located at 3094 Lester Drive, would not be affected.

Aside from the personal incomes of the more than 300 employees who will be displaced, the closure will likely also have an impact on property tax collections for Kendallville and other overlapping government units including Noble County, East Noble School Corp. and Kendallville Public Library.

In terms of taxing, industrial properties are generally the most lucrative because they are worth significantly more than any individual home, but also because the property tax cap for business properties is higher at 3%, meaning it’s less likely for governments to miss out on taxes due to the higher cap level.

In total, LSC Communications was assessed $713,269.06 in total taxes for 2020. That total includes real property — land and structures — and its two plants in Kendallville’s industrial park and personal property — equipment — at the facilities.

That total is broken down proportionally to different government units in the tax district. Kendallville gets the biggest slice at $324,770.58, followed by East Noble at $222,826.76, Noble County at $107,269.64 and Kendallville Public Library at $47,568.60. Wayne Township and the Northeast Indiana Solid Waste District also get small portions of the total tax bill.

In terms of each government unit’s total 2020 tax levy, the amount each unit needs to collect from property taxes to fund its annual spending, LSC Communications’ property taxes alone account for about 6.49% of Kendallville’s total 2020 levy.

The annual taxes from that one company also account for about 3.22% of Kendallville Public Library’s annual revenue, 2.23% of East Noble’s revenue and 1.14% of the Noble County government’s revenue.

So how much do local governments face to lose from the closure?

Based on publicly available tax information, it’s impossible to tell exactly. At best, the impact could be little to no loss, while at the worst the decrease in taxes could total tens of thousands of to upwards of $100,000 in annual revenue for local governments.

The impact will depend primarily on two factors: How much equipment is in the Marion Drive facility and how much of it will be removed?

The tax value of the real property, the land and the buildings on top of it, should remain as the buildings will remain and still be assessed tax. LSC’s 2020 tax bill for the real property at its Marion Drive facility is $88,311.26. The Lester Drive facility is worth more at $157,304.44.

Most of the taxes the company pays are on personal property for the multi-million-dollar printers and machinery in its facilities. In total, LSC Communications was assessed $467,664.60 for its personal property in 2020.

How much is directly attributable to the Marion Drive facility is unknown, however.

According to the Noble County Assessor’s Office, companies that have multiple locations in the same tax district — which LSC fits as the two facilities are just down the road from each other — are able to file a single personal property tax form that covers all of their local equipment. Therefore, the $467,664.60 total assessed for personal property would cover equipment at both plants in Kendallville.

Detailed information about what equipment is assessed at what facility is not public information, the assessor’s office said.

The other complication is figuring out what will happen with the equipment that is in the Marion Drive plant. As long as it remains physically in Noble County, it will continue to be assessed and taxed.

LSC’s Worker Adjustment and Retraining Notification to the state indicated the plant would be “permanently” closed, so it appears unlikely at this time that the plant would reopen in the future. The company, which is headquartered in Chicago, is currently going through Chapter 11 bankruptcy proceedings.

While it’s unlikely to reopen the plant, if LSC Communications chooses to simply warehouse the equipment in Kendallville as it goes through bankruptcy or as it seeks to sell or liquidate property, the tax impacts to the community should be minor.

However, if the company goes in and removes equipment in order to sell it or simply move it elsewhere outside of the county, that value would disappear and the local government units would lose whatever taxes were drawn from it.

The potential tax loss in that situation would be less than the total $467,664.60 — since the Lester Drive facility also contains equipment and that plant is currently not slated to close — but would likely be a significant fraction of that total.

A call to LSC Communication’s corporate office in Chicago seeking more information about what to expect following the plant’s closure was referred to spokesman and not immediately returned.

Kendallville Mayor Suzanne Handshoe said she hasn’t heard any specifics about LSC’s plans after it closes, but noted the potential tax impacts to the city could be significant.

Of the two LSC facilities, Handshoe said that the Lester Drive plant that is not closing has the more expensive equipment inside of it, which could mean that even if the Marion Drive facility is cleared the impact may not be as severe. However, any tax dollars sapped will have an impact on the city’s bottom line.

“Either way, that is a negative impact on our taxes for the county, us, for everybdoy who draws tax on them,” Handshoe said.

On one positive front, Handshoe noted two other companies have already stepped up and expressed some interest about potentially buying and occupying the Marion Drive plant, so the 287,000-square-foot building might not stay vacant for long if LSC opts to sell.

Although it’s unlikely a new firm would rack up the same kind of values Courier/LSC invested over several years in its facilities overnight, a new company or a firm relocating to a larger space could represent the potential for future industrial tax base growth.

The closing and the displacement of all 307 employees could also have an income tax impact to the city and other units, although income tax disbursements are calculated in Indianapolis and on a time lag, so effects from the closure wouldn’t show up immediately.

Handshoe reported that efforts to set up job fairs have been successful, with one scheduled for inside the LSC plant for its employees and a second scheduled at the Community Learning Center for anyone in the community in search of work.

Based on the interest in those job fairs so far, Handshoe was optimistic that many of the displaced LSC workers will stay in the community.

“Our hope is that all those jobs will be retained here in the county and we have like 17 employers that are anticipating will participate,” Handshoe said.

Looking ahead to the 2021 budget, local governments are enjoying the boon of a very high growth quotient — the percentage that the state allows governmental units to grow their spending each year — at 4.2%.

Despite that bigger-than-usual growth in budgets, Handshoe and Kendallville City Council members have already discussed the potential negative impacts they could suffer from LSC’s closing, although the city will still budget normally and rely on the city’s healthy reserves if it needs to in the short term.

Department heads also generally put off major discretionary purchases until later in the year until they have a better idea of how the full-year budget is shaping up and whether the money is available or whether they may have to wait until next year to make a purchase that’s not a must-have right now.

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