The Jefferson City Council last week approved an economic-development tax incentive to help local commercial printing company Modern Litho add a fourth press and 50 new jobs to its operation.
The seven-year industrial revenue bond will allow Modern Litho to purchase a Heidelberg XL106 10 Color + Double Coater Perfecting Press while paying only 25 percent of the personal property tax that would be owed on the new equipment based on its assessed value.
The Jefferson City Area Chamber of Commerce, which facilitated the economic-development agreement between the company and the city, estimates the tax benefit over the seven-year term of the abatement to be roughly $310,597, factoring in the equipment's depreciation over that time.
"What we are doing is not the norm in the industry. Printing companies who are not investing and growing are withering," said Cassandra Atchison, marketing coordinator for Modern Litho. "We are continuing to invest in the latest print technology and expanding our capabilities."
Modern Litho operates a manufacturing facility on Stertzer Road in Jefferson City, and the company also owns Brown Printing on Madison Street in Jefferson City and a third facility in St. Louis. The new press is considered top-of-the-line, and the company projects it will increase workflow capacity by 30 percent.
"It will be our most highly equipped press across all three manufacturing plants," Atchison said. "In the past, when we've added new press capacity, we replaced older-model equipment."
Jefferson City agreed to a similar tax incentive for Modern Litho in 2012 when the company replaced two old presses with a new, larger one. The 100 percent personal property tax abatement on that equipment saved Modern Litho approximately $97,000 in taxes over its first two years, and it continues through 2017.
Modern Litho's corporate revenue increased by 8 percent in 2015, and the company is confident growth will continue to warrant the new equipment while also increasing efficiency.
"One of our goals is to accelerate the plate-to-press time once a job has been approved for printing. Because of our continued growth, we were experiencing a backlog at press even though they were operating 24/7. That caused pressure on the bindery and fulfillment departments. This press will solve that challenge," Atchison said. "It's going to give our bindery more time to work."
She said the new press will enhance workflow especially for products like magazines, catalogs and small-run niche publications. For some of those clients, the improved efficiency is key.
"Clients are wanting quicker turnaround times," Atchison said. "When we can't physically get from plates to a printed product fast enough, it can be a deal breaker."
Modern Litho's tax benefit also means, in a way, a tax revenue loss to local entities including Jefferson City, Cole County and Jefferson City Public Schools. As the company receives a 75 percent tax abatement, those taxing entities receive only 25 percent of potential new tax revenue from the new equipment.
From an economic development standpoint, it's a matter of whether the business expansion and new jobs that come with it would happen without the added incentive.
"This was heavily weighted on the local incentive," said Shaun Sappenfield, existing business manager at the local Chamber of Commerce. "So if Modern Litho couldn't make the numbers work without the benefit of the tax incentive, the project may not have happened."
JCPS has the most to lose, as it receives the most benefit from property tax collected, and property tax accounts for roughly half of the district's annual revenue.
Because the company will pay 25 percent of new property tax revenue, the chamber estimates the public school district will still receive an additional $69,433 over the seven-year abatement period, with $34,166 going to the other taxing entities during that time. Modern Litho will pay the full property tax owed on the Heidelberg press in its eighth year of ownership, but by that time, the equipment will have depreciated and will be assessed at a much lower value.
"At the end of the day, we need to keep this company strong as we look forward to the future, said Modern Litho President Darrell Moore. "We have a responsibility to our employees and their families, as well as our community who have helped us with the growth over the years."
Atchison said the continued support of the Jefferson City community is part of what allows Modern Litho to keep its headquarters here, adding there's been no talk of that changing regardless. It's another principle of economic development the local Chamber of Commerce has emphasized.
"You have to support not only what you're trying to bring in if you're trying to attract somebody and entice them but you have to support and maintain what you have. If you don't support them, somebody else will," Sappenfield said. "Think about if this project never happened at all, and it's a zero-sum gain."
Modern Litho has pledged 50 new jobs over five years as a result of this expansion. That's a 26 percent workforce increase over the company's 192 employees at all locations.
The new positions will come incrementally as Modern Litho's workflow increases.
"We are ramping up our sales and marketing efforts to attract more clients. In turn, we'll be adding jobs across the board," Atchison said. "Those new jobs will be at all levels, from the pressroom to customer service to estimating. As we see the capacity of the plant increase, we're going to need those extra hands on board."
Modern Litho expects the new press to be up and running this September, after which time the company could consider a building expansion, Atchison said.
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