Barracuda Networks ready to move downtown with tax breaks approved by Ann Arbor City Council
With tax breaks from the city of Ann Arbor and other incentives from the state of Michigan, Barracuda Networks is moving ahead with a multimillion-dollar expansion.
The Ann Arbor City Council voted 9-0 Monday night to approve a five-year abatement for Barracuda as it prepares to move into a portion of the former Borders building downtown.
Barracuda must hire 144 new employees by Dec. 31, 2014, as part of its expansion in downtown Ann Arbor or else it will have breached the terms of its agreement with the city.
Sean Heiney, Barracuda's vice president of strategic initiatives, said the company is hoping to be able to move downtown by November and confident it will meet that goal.
Barracuda Networks plans to hire at least 144 new employees in Ann Arbor as part of its expansion.
Melanie Maxwell | AnnArbor.com
The Campbell, Calif.-based network security firm is receiving tax breaks on nearly $1.7 million worth of real property improvements and equipment, according to a memo from City Assessor David Petrak.
City officials estimate the savings to Barracuda will total about $61,184 over five years — a little less than the previously estimated $85,150. The Michigan Economic Development Corp. also is providing a $1.2 million incentive to assist with the company's relocation.
"I know there are many people in the community, myself among them, who over a period of about a year and a half have had meetings with folks over at Barracuda," said Mayor John Hieftje.
"I appreciate their resolve to stay in Ann Arbor, their desire to be in downtown," he said. "I think they really do add a lot of life there, and I look forward to having them here for a very long time."
In 2007, Heiney founded Barracuda's research and development center in Ann Arbor, which is charged with designing and developing new product lines.
He said Barracuda made a corporate decision to invest in Ann Arbor over Silicon Valley and other sites, so the commitments from the city and state reassure the company that was a wise move.
In order to bring more light into the building, Barracuda and First Martin are installing windows along Maynard Street.
Photo from John Teeter
Heiney said Barracuda has plans to improve the facade along Maynard Street, which he acknowledges is not one of downtown's most attractive areas.
"We intend to change that," he said. "We've been working with some great architects and designers on different proposals that will change that facade. I think the city and the Downtown Development Authority are excited to cooperate to make that area less of a cave and more of a lively place that's more reflective of downtown Ann Arbor."
Hieftje called the city's chief financial officer, Tom Crawford, to the podium to confirm the tax revenue the city will receive from Barracuda will exceed the amount of the abatement.
"When we do something like this, it doesn't cost the city anything," Hieftje said. "We're actually gaining from this action."
Council Member Jane Lumm said many cities grant abatements to retain and attract businesses, but because Ann Arbor is such an attractive place to do business, it rarely has to offer them.
"Occasionally, though, on a very selective basis, abatements are appropriate, and I'm convinced that is the case here with Barracuda," she said.
Just before the council approved the abatement Monday night, Heiney remarked that "Ann Arbor is a cornerstone of where we're going to continue to expand corporately."
"We're excited to get downtown and maintain the culture we've established and continue to hire software development engineers and engineers who support our products," he said. "These are all great-paying jobs that I believe will be a positive impact on the downtown community."
Watch a video of Heiney talking about Barracuda and Ann Arbor:
Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's email newsletters.
Comments
Ryan J. Stanton
Tue, Oct 2, 2012 : 7:47 p.m.
Crawford estimated $137,709 is what Barracuda would pay in taxes without the abatement, but with it there will be an estimated $76,525 in total new revenue over the five years. The city, as one taxing jurisdiction, represents $20,148 of that amount, Crawford said. But because the property is in the downtown, the DDA actually gets the city's portion. Of the $61,184 being abated over five years, Crawford said, about $20,184 represents the city's share. Again, that is in the DDA.
Tru2Blu76
Tue, Oct 2, 2012 : 2:52 p.m.
"...so the commitments from the city and state reassure the company that was a wise move." –– Ah, the glories of Unrestrained, Brave and Endlessly Profitable Capitalism!... with government handouts to "attract businesses" and the "creation" of a few more jobs (which may or may not prove so profitable to the job holders). What this has developed into is a competition between states and cities to "attract businesses" with bribes, using taxpayer money to pay the bribes. And we wonder why businesses got so Entitlement Bound. What could go wrong? Hah!
Veracity
Tue, Oct 2, 2012 : 1:27 p.m.
With the DDA running budgetary deficits and the City government considering reducing safety services because of tight finances, gifting private corporations tax dollars will not help resolve either the DDA or City's financial problems. Ann Arbor is a desirable place for companies to locate so inducements should not be necessary. However, City Council recently made it easier to return TIF money to developers as reimbursement for site developments. This is happening with the South Main development and is being provided for the Arbor Hills Crossing and Georgetown Mall projects also. Last year Zingerman's received a gift of over $400,000 to assist with its expansion. As the word gets out that Ann Arbor can be easily persuaded to provide tax reductions and other inducements, corporations will routinely demand such special treatment. Meanwhile the DDA budget and the City's general budget will continue to struggle.
Ron Granger
Tue, Oct 2, 2012 : 1:15 p.m.
This is a gain because it will draw other companies, and talent, to Ann Arbor. It is one more step to making Ann Arbor a technology and entrepreneurial town. It gives graduates a local place to work. It gives those who take the startup risk a place to fall back if their venture fails, and a way to pay the bills. It gives companies a place to poach talent. In time, we will see employees leaving the A2 Barracuda office to start their own companies, hopefully in A2. It is a gain because they are spending more money than the city abatement in improvements to the cave-like area around the parking structure. The $1.7 they are spending on improvements creates work and jobs. It is a gain because they are moving into an empty building. It is a gain because the 144 promised hires at an average of $80K/year is $11.5 million a year in salaries added to A2. That is in addition to the 200 existing. Barracuda could have easily moved out of the city and into one of the townships. There are plenty of office buildings just South of the airport. They could have easily added these highly compensated positions in one of their other existing locations across the country. Countless cities would offer them tax breaks to open an office. That's just a few off the top of my head. Please resume the complaints about their getting a small city tax break. Though maybe you should have attended the meeting and tried to convince any one of the 9 council members to see it your way.
Brad
Tue, Oct 2, 2012 : 1:24 p.m.
They will move into an empty building and leave an empty building behind. They would have added staff in whatever building they wound up in. So I guess the city being #1 on every list imaginable isn't a good enough reason for them to stay? No, we need to throw money at them, too. Great negotiating there. Sorry, still not convinced. It isn't that I'm not glad that they are here and growing, I just haven't bought in (and still don't) to the idea that something similar wouldn't have happened without the enticements. And also that them moving downtown is something that is a huge benefit to the city as a whole rather than a smaller and more localized effect. AA.com - between the tax abatements and the parking discounts do we have any totals yet on what the taxpayers are coughing up here?
xmo
Tue, Oct 2, 2012 : 1:09 p.m.
After being in the Top Ten of so many city rankings, Barracuda Networks should be paying extra taxes to stay in Ann Arbor!
Richard Carter
Tue, Oct 2, 2012 : 1:03 p.m.
I'm glad this one comes with conditions of a certain level of employment... remember the Pfizer tax break?
Tom Todd
Tue, Oct 2, 2012 : 10:50 a.m.
can i get a break on my taxes
sparky
Tue, Oct 2, 2012 : 1:03 p.m.
No. However, if you put your capital at risk, hire a lot of new employees who will come to town and pay rent or buy houses, spend wage dollars on food and other local goods, then we will consider giving you a tax break.
Ron Granger
Tue, Oct 2, 2012 : 12:54 p.m.
How many highly compensated positions will you be hiring downtown?
A2comments
Tue, Oct 2, 2012 : 10:31 a.m.
"When we do something like this, it doesn't cost the city anything," Hieftje said. "We're actually gaining from this action." How is it a gain if you give tax abatement? Isn't that lost tax revenue? If tax revenue exceeds the abatement, the abatement is still a cost Mr. Mayor.... I hope that if they breach the terms of the agreement, the city then recovers the abatement. The real question is whether they would have moved a without any financial incentives...
A2comments
Tue, Oct 2, 2012 : 7:50 p.m.
I understand that if Ann Arbor gives them a $5 abatement and they pay $6, Ann Arbor gets $1. My point was that abatement IS A COST. First, they may have expanded if they got no abatement. Second, no where do I see how much they pay today with their current staff. They weren't going to leave, never threatened to do so. An abatement is lost revenue. Whether you then get more tax or not, it actually DID cost the city something.
Ryan J. Stanton
Tue, Oct 2, 2012 : 2:14 p.m.
The argument the mayor is making is that Barracuda might not have chosen to expand in Ann Arbor without the incentives, and even though the city will forgive a portion of the taxes for five years, it's still gaining some new tax revenue from the move.
aabikes
Tue, Oct 2, 2012 : 1:15 p.m.
hey Brad, as a citizen of downtown, add me to that list of people who care.
Richard Carter
Tue, Oct 2, 2012 : 1:03 p.m.
"If tax revenue exceeds the abatement, the abatement is still a cost Mr. Mayor...." As much as I agree with everything else you said, this is as nit-picky as saying that it "cost" you if you buy something for $5.00 and get a $6.00 rebate.
Brad
Tue, Oct 2, 2012 : 12:21 p.m.
Can he be that clueless, or does he think that we're that clueless? I'm not sure which. No way they would have left Ann Arbor. They might have moved somewhere else than downtown, but other than the mayor/council/DDA and downtown eateries, who really cares?