Dalton Foundry sold and now expected to reopen in Warsaw with new tax abatement

WARSAW — Dalton Foundry closed back in May, but it’s looking to have a “rebirth” and start back up and expand with the help of the city of Warsaw.

At their meeting Monday night, Warsaw Common Council unanimously approved a 10-year personal property tax abatement for Dalton Foundry LLC.

In presenting Dalton’s tax abatement request to the council, Community and Economic Development Director Jeremy Skinner said Dalton “expects to spend $8.2 million in new manufacturing equipment and bring back 125 new jobs that left a few years ago.”

He said the property at 1900 E. Jefferson St. is currently non-functioning and its assessed value is being decreased as he spoke because it’s no longer operational.

“This company, MiddleGround Capital, is going to come in and put $8.2 million in new equipment. Bring that property back to functional. Bring the assessed value back to where it was, or higher than what it was prior, and that increases the amount of property tax we receive off that project,” Skinner said. “On the real side, and on the personal side – because it’s even though it’s a tax abatement, that tax abatement is stepped down … it’s our typical 10-year tax abatement.”

The 125 jobs also will equate to over $100,000 in income tax that the city will regenerate that was lost 1-1/2 to two years ago, he said. “That also helps us keep our tax rate down because that’s revenue we use. The LIT (local income tax) goes into a lot of different categories that provides services, whether it be police, fire, wastewater, street department. LIT pays for a lot of those different operational needs,” Skinner said.

Mayor Jeff Grose pointed out the current number of employees at Dalton is 17 with salaries estimated at almost $1.2 million. If 125 new employees are added, he said that will push salaries up to $7.8 million.

Tony Goodman, active president at the Dalton Foundry LLC facility, said they’re 116 years in business and that’s because of the people who work there.

“We do have MiddleGround investing in our facility, or wanting to, and wanting to get the abatement so we can help improve the facility,” Goodman said.

He said they hope to grow their employees to about 17 to 125 by the end of this year or sometime early next year and then continue to grow.

“The foundry industry is shrinking dramatically over the years. Since the ’80s, I think we had 2,000 foundries, now we’re less than 200 foundries in this country and they keep going out of business. So a facility like Dalton being rebirthed and coming back alive has a great opportunity to gain a lot of business,” Goodman said. “When Dalton closed back in May, a lot of our business went overseas. We lost business to Germany and Mexico specifically because of engine blocks.”

He said a lot of people may not know that Dalton is the sole supplier of gray iron engine blocks in the United States and Dalton supplies them to every automotive manufacturer. “We make them right here in Warsaw, Indiana. To me, that’s a proud moment.”

Goodman said they were asking for the abatement “to help Dalton come back to life and hire employees back to start producing this product again.” He said they’re reaching out to their customers and have a lot of commitment to return. “Even so, there’s more business opportunities for foundries that are closing today. So, that 125 could be 250, could be 400, could be more.”

The backside of the foundry is an eyesore to some people, he said, but his personal goal is to improve that, maybe with murals.

He said they had a lot of great employees and a lot of them want to come back to work at Dalton.

“I’m personally very excited. We get to rebirth and rebrand this location. Again, it’s in Warsaw, and I think the opportunity for Warsaw and Dalton Foundry to be as big as it once was in the ’80s, per se. We could be that again, there’s no question,” Goodman stated.

Ross Benitz, attorney, said the industry is under a lot of pressure because of Dalton’s shutdown. “So, the auto parts manufacturers are having to make quick decisions here on if there is a domestic solution, i.e. the foundry in Warsaw, or if they need to source outside — Mexico, Germany. Those decisions are being made right now. Assuming the foundry can get operational quickly, we feel like a lot of that business would come right back to Warsaw. Like I said, timing is of the essence right now,” he said.

Councilwoman Diane Quance asked how long will it take for Dalton to get started back up. Goodman said once they look at the abatements and financials of it, he estimated 60 days or less.

“We did not allow the facility to break down or fail. When we were closing, when we were officially closed, GM and Mercury Marine put an offer together to help us back up and run. And we did,” Good man said. “So we (did) a lot of inventory for them. We built 10,000 engine blocks and about 24,000 heads in six weeks. Produced them and finished them, and we kept employees on to do that. It was a major feat. While we did that, we ran better than we had all year and had less scrap during that timeframe.”

He said it took employee caring and dedication to come back and do that.

MiddleGround Capital is a private equity firm out of Kentucky, Benitz said. “I can tell you the foundry would fit in well with their portfolio. They are owners-operators. There’s not a lot of interest in coming in, stripping it down and taking profits out,” he said.

“… They are very interested and have a self-interest in products that are produced at the foundry into the future. So they have a large incentive to see the foundry become successful, operate successfully into the future, have a partnership with the community and, again, see operations not only be successful in short term, but for years and year.”

Skinner said while there’s people who may be for or against the tax abatement, “I think the reality is, we have a long history of people that worked at this business in our community, and it’s fed their families, it’s educated their families and it’s paid taxes to our community. So, what we’re talking about is our people. Our community. Some of them lost their jobs, and some of them will be able to return to their jobs and that’s what we’re hoping.”

He said MiddleGround Capital is not a fly-by-night operation but a legitimate company that has a lot of different holdings and are very successful at what they do.

“They did not come in to take this foundry because they’re unsuccessful. They came in to take this foundry because they know they can make it operational again and they know they can make it profitable again,” Skinner stated.

Councilwoman Cindy Dobbins pointed out the abatement only applies to what they spend. Skinner said the abatement carries with the property, not the owner.

Goodman said MiddleGround Capital did a lot of due diligence and they put a lot of time and energy into investigating Dalton and making sure that’s what they wanted to do. He said he thinks they’ll be real successful with Dalton.

Skinner said, “And I think that just speaks to MiddleGround. … We have a very bad taste in our mouth because of (previous Dalton owner) First Brands, but MiddleGround is not First Brands. First Brands, a couple of their people are going to prison. They were crooks and they were a bad company. You can look Middle Ground up, we’re not in the same boat in that instance. So a lot of what has transpired at Dalton was really more about First Brands and less about Dalton.”

Councilman Mike Klondaris said MiddleGround buys and holds companies for years and years. “I think it’s a slam dunk. It’s a good company,” he said.

He made the motion to approve the abatement, Dobbins seconded the motion and it passed 7-0.