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Thinking big reaps more rewards

Posted: July 22, 2012 2:00 a.m.
Updated: July 21, 2012 7:10 p.m.

William Barritt, chief financial officer of Aerospace Dynamics International Inc., said he uses the city's Use Tax Incentive to build a stronger company and community.

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One local company was the catalyst for the development of a city Use Tax Incentive program to benefit local businesses, which also led to the establishment of a training program, according to city officials.

The program continues to help manufacturing and aerospace industries today by teaching the specialized skills needed for these fields.

Aerospace Dynamics International Inc., of Santa Clarita is one of the largest machining companies in the country and specializes in high-precision and large complex parts for the aerospace and defense industry.

William Barritt, ADI’s chief financial officer, had an idea to benefit both local companies and the city of Santa Clarita, said Jessica Jackson, city communications specialist.

More than 15 years ago, Barritt pointed out that the company needed more qualified employees, a center to train them and the means to fund the project.

Barritt approached College of the Canyons with the concept of a training center ­— providing access to real-world situations and projects — and offered to house it at ADI.

The biggest hurdle was how to fund the project and purchase the expensive computer-controlled machinery needed for the training.

Unlike standard sales taxes, in which 1 percent automatically routes back to local cities, use taxes are paid to the state by companies when making out-of-state purchases. But none of that tax comes back to the city, said Jason Crawford, marketing and economic development manager with the city of Santa Clarita.

The only way a city can recoup its share of taxes locally is for the business to notify the state that it wants the local government where the business is to recoup its legally entitled share of the taxes paid.

So, as a result of discussions with Barritt, Santa Clarita developed the Use Tax Incentive program, allowing businesses to designate the tax payments they pay to the state of California, on any out-of-state purchases to be distributed back to the city.

“When you think bigger, it comes back to you bigger than you can imagine,” Barritt said.
The efforts paid off with the founding of the Centers for Applied Competitive Technologies in 1998, with COC.

The city allocated a portion of the tax payments received from the state to COC to help pay for the pilot training program, which is still in use today, Crawford said.

The training center, equipped with advanced CNC automated milling machines used to make industrial components, develops workers skills making them skill-ready for more advanced jobs.

In the case of a company like ADI, which spends at least $500,000 in use tax each year, having the full local share redirected to the city is a significant benefit. The funds can be used for a variety of city programs, including public safety, open space and parks and recreation, which enhance the community’s quality of life.

“The use tax program is like pennies from heaven, but instead of pennies, we are talking about hundreds of thousands of dollars that companies can direct back to their city,” Barritt said.

Businesses cash in

The trick to recouping sales tax revenue, however, is to alert and incent businesses to notify the state that they want the city of Santa Clarita to receive its share of the taxes collected. For example, the city partnered with COC to get the CACT training program off the ground initially.

The city also rewards businesses for designating the city to receive a share of the taxes paid by giving local companies a rebate from the tax share collected. And a couple of months ago, the city changed the program so it could partner with local organizations to get the word out to businesses, Crawford said.

“For example, for every $10 the city collects, we give 4.5 percent back to the business and 4.5 percent back to the organization that helped us recoup the state taxes,” Crawford said. “Collecting use sales tax is essentially all new money we wouldn’t have gotten anyway so we have an incentive for businesses to help the city get its fair share.”

As a result, the success of the Use Tax Incentive and CACT training programs, in small part, contributed to ADI’s growth.

Currently, the company is in the process of renovating two buildings, acquiring a new building and using the second option for Use Tax Incentive to help finance the improvements and growth.

Barritt remains as focused on building the company and its brand as he is on building a strong Santa Clarita.

Earlier this year, ADI was recognized by Boeing as its “Supplier of the Year” for 2011. ADI also recently was honored with a resolution from the COC’s Board of Trustees for its ongoing support of the CACT training program.

For more information about the program, contact the city of Santa Clarita’s Economic Development Division at 661-255-4347.

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