City Council has approved a six-year tax abatement for TelNet Worldwide Inc. in order to secure the company’s $37 million investment to the city by creating a wholesale data center.
During the March 18 City Council meeting, council voted unanimously to approve the creation of an industrial development district to rezone the property housing the vacant building to be used by TelNet, and in a follow-up vote, unanimously approved the economic development incentives.
“Southfield is increasingly considered the high-tech hub of southeastern Michigan,” Mayor Brenda Lawrence said. “More than 350 high-technology, information technology and telecommunications firms already call Southfield home. High-tech companies choose Southfield for our extensive infrastructure, suitable climate, abundance of skilled workers and central location that provides easy access to the entire metro area and the international borders of Canada.”
TelNet Worldwide, a telecommunications and information technology company, purchased the 41,148-square-foot facility at 21005 Lahser Road in 2011 with the intention to develop it as a carrier-neutral data center. The interior of the facility was never finished and has been vacant for several years, requiring a complete interior build-out to meet the design requirements.
TelNet will make a capital investment of approximately $37 million in real and personal property by 2015, and representatives told council that they plan to add up to 40 full-time employees with an average annual salary of $67,000 in the same time span.
“Southfield, with its well-developed fiber infrastructure and central location in Southeastern Michigan, makes it a draw for businesses,” Council President Ken Siver said in a statement. “We couldn’t be happier to add TelNet to our growing portfolio of high-tech companies.”
The company plans to host an additional four to five wholesale tenants, who will make approximately $50 million in additional capital investments in the next three years.
Council first began studying the matter at a Feb. 11 meeting and then made the vote after a public hearing March 18. Though the council had a quorum to vote, only four members of council were present: Jeremy Moss, Myron Frasier, Sylvia Jordan and Council President Siver.
Moss said that the tax abatement for TelNet was the right choice to not only give incentive to the company to establish its facility in Southfield — rather than Indianapolis, which was the direct competitor with Southfield for the site — but because they are a community-oriented company that will give back to the city.
“This isn’t just a company coming in and building a site and not being members of the community. They have shown through their other facilities that, when they come into an area, they support local projects and community organizations,” he said, adding that TelNet has existing partnerships with HAVEN and the Boys and Girls Club. At the meeting, Moss noted that he hoped to see the company work hand-in-hand with the ’field Zone.
Moss said that the tax abatement for the company means more growth for the city, long term.
“On average, when projects like this come forward and we offer a tax abatement, we abate 18 percent and collect 82 percent. We have to be competitive with other cities in offering incentives; if we didn’t offer any incentives (and TelNet didn’t invest in Southfield), we would be collecting 0 percent taxes.”
Figures show that the city nets about $19,000 annually in taxes on the currently vacant building, or $115,000 throughout the next six years. With the approval of TelNet and its data center, the city will collect $784,000 throughout the next six years in taxes, which is about a 50 percent abatement, according to Siver, with an additional $525,000 from the anticipated data center tenants.
Combined, that means a projected $1.6 million in the city’s general fund moving forward with TelNet, he added.
At the meeting, council members also requested that TelNet officials utilize the Southfield Career Center to net as many qualified Southfield residents as possible for employment at the facility, and also to encourage employees of the company to consider moving to Southfield to further advance the city’s neighborhood stabilization efforts.
Southfield, which houses Lawrence Technological University, is also the original home to the Automation Alley SmartZone and the Great Lakes Interchange — one of the first state-designated information technology clusters. The Great Lakes Interchange region is ranked third in the nation for the number of technology companies and fourth in total employment in high-tech industries.
Shelly Freeman, business development manager for Southfield, said she believes TelNet will be a great benefit to the community and its cluster of high-tech companies.
“As technology continues to evolve, companies will have more options to concentrate on their core mission, knowing that they can rely on specialists to handle their computer services,” she said. “The city of Southfield continues to market our community to information technology companies; they are a growing sector. Therefore, we were pleased to partner with TelNet to assist them in growing their business in Southfield.”
Freeman added that the hope is for TelNet to also function as a catalyst for more high-tech companies.