Explanation
BACKGROUND: The Tax Incentive Review Council (the "TIRC") recommended on August 25, 2006, that the City dissolve the Enterprise Zone Agreement with Safety Today, Inc. and Meritex Columbus, LLC (the "EZA") as of December 31, 2006, with 2006 as the final tax year for the exemptions on real and personal property under the EZA, unless Meritex's tenant at the project facility, Kumho Tire USA, converts eight (8) of its temporary jobs to full-time permanent jobs, with the conversion accomplished or imminent by October 7, 2006. The City concurs with the TIRC's recommendation.
Columbus City Council authorized the EZA initially in March 2001 with Safety Today, Inc. ("Safety Today") and the Daimler Group, Inc. and in September 2001 approved Spiegel Drive, LLC to replace The Daimler Group, Inc. in the EZA. The companies entered into the EZA effective January 1, 2002. Meritex Columbus, LLC ("Meritex") succeeded to the interest of Spiegel Drive, LLC in December 2004 with the approval of City Council. The project site is located at 2425 Spiegel Drive in the Rickenbacker area. The EZA granted a 60%/7-year tax abatement on real property improvements and new personal property and required real property investment of $4.8 million to construct a 225,000 square foot facility of which Safety Today would lease approximately 40%. Safety Today committed to invest $1,550,000 in new personal property, of which $1 million was for new inventory. It was later determined that the project site is within the Foreign Trade Zone (100% inventory exemption) making the EZA exemption on inventory superfluous. The project has met most of the real and personal property investment goals. The EZA required Safety Today to retain 43 existing jobs and for a total of 48 new full-time permanent jobs to be created, of which Safety Today was responsible for 23 jobs and Meritex was responsible for securing a tenant(s) that would create 25 new jobs. Meritex secured Kumho Tire USA ("Kumho") as a tenant in April 2005. When the TIRC reviewed the project in August of 2005, Safety Today and Kumho together had created only 8 full-time permanent new jobs whereas 48 full-time permanent new jobs are needed for compliance. At the time, Kumho had 10 temporary positions being filled by workers from staffing agencies. City Council accepted the 2005 TIRC recommendation and in October of 2005 amended the EZA to reduce the job creation requirement to 15 full-time permanent jobs and to reduce the tax abatement from 7 years at 60% to 6 years at 60% (2002-2007).
A year later, in August of 2006, the majority of Kumho's labor at the project site was still temporary and Safety Today and Kumho together had created only 7 full-time permanent new jobs. This left the project 8 jobs short of compliance with the reduced/amended job creation requirement of 15 jobs. Kumho reported on August 23, 2006, that it was considering hiring 8 of its full-time temporary workers to permanent status. On September 7, 2006, City staff notified Safety Today, Meritex and Kumho of the TIRC's August 25, 2006 recommendation.
FISCAL IMPACT: No funding is required for this legislation.
Title
To dissolve the Enterprise Zone Agreement with Safety Today, Inc. and Meritex Columbus, LLC (the "EZA") as of December 31, 2006, with 2006 as the final tax year for the exemptions on real and personal property under the EZA, unless the tenant at the project facility, Kumho Tire USA, converts eight (8) of its temporary jobs to full-time permanent jobs, with the conversion accomplished or imminent by October 7, 2006; and to declare an emergency.
Body
WHEREAS, the Columbus City Council approved an Enterprise Zone Agreement with Safety Today, Inc. ("Safety Today") and Spiegel Drive, LLC ("Spiegel Drive") on March 19, 2001 by Ord. No. 435-01, as amended by Ord. No. 1444-01 on September 17, 2001; and
WHEREAS, the City entered into the Enterprise Zone Agreement with Safety Today and Spiegel Drive effective January 1, 2002 (the "EZA"), in which the City granted a 60%/7-year (2002-2008) abatement on real property improvements and new personal property; and
WHEREAS, the EZA required an investment of $4.8 million to construct a new facility, $1.55 million to acquire new personal property, for Safety Today to retain 43 existing jobs and to create 23 new jobs and for Spiegel Drive to obtain a tenant(s) for the facility's speculative space that would create 25 new jobs (i.e., 48 new jobs in total; 91 jobs in total including both retained and new), with the job creation to be attained by the end of December 2004; and
WHEREAS, Meritex Columbus, LLC ("Meritex") succeeded to the interest of Spiegel Drive in the EZA with the approval of Columbus City Council by Ord. No. 2190-2004, adopted on December 15, 2004; and
WHEREAS, by April 2005, Meritex had secured a tenant for the facility's speculative space and as of July 2005 that tenant, Kumho Tire USA ("Kumho"), had only 4 full-time permanent employees at the project site and 10 temporary workers through staffing agencies, with the temporary positions not counted toward the EZA job creation requirement; and
WHEREAS, due to a lack of job creation and based on a 2005 recommendation from the Tax Incentive Review Council (the "TIRC"), Columbus City Council reduced the project's requirement for job creation from 48 jobs to 15 jobs and reduced the term of the abatement by one (1) year, making 2007 the final tax year of exemption, by Ord. No. 1735-05, adopted October 26, 2005; and
WHEREAS, as of December 2005 and August 2006, the EZA project had met most of the goal for real and personal property investment and Safety Today had satisfied the job retention requirement; and
WHEREAS, as of August 2006, the project was still short on job creation, having only 7 new/created full-time permanent jobs, 3 at Safety Today and 4 at Kumho, which equates to 47% attainment of the reduced/amended job creation goal of 15 jobs; and
WHEREAS, while Meritex's tenant, Kumho, is not a party to the EZA it does realize cost savings from the tax abatement, has been using full-time temporary workers since 2005, and could elect to convert 8 of the temporary positions to permanent positions, thus giving the project as a whole 15 permanent full-time jobs and putting it in compliance with the amended job creation requirement of 15 jobs; and
WHEREAS, in August 2006, Kumho reported that it was negotiating with its staffing agencies regarding the hiring of 8 temporary workers to permanent, full-time basis; and
WHEREAS, the TIRC recommended on August 25, 2006 that the City should dissolve the EZA as of December 31, 2006, with tax year 2006 as the final tax year for the real and personal property tax exemptions, unless Kumho converts 8 of its full-time temporary positions to full-time permanent and the conversion is complete or imminent by 30 days notification from the City; and
WHEREAS, the City notified notified Kumho Tire, Meritex and Safety Today of the TIRC's recommendation on September 7, 2006; and
WHEREAS, the City concurs with the TIRC's recommendation; and
WHEREAS, an emergency exists in the usual daily operation of the Department of Development, in that it is immediately necessary to take action on the TIRC's recommendations to comply with the sixty (60) day deadline for City Council action imposed by imposed by R.C. Section 5709.85 and to preserve the public health, property, safety and welfare; NOW, THEREFORE,
BE IT ORDAINED BY THE COUNCIL OF THE CITY OF COLUMBUS:
Section 1. That Columbus City Council hereby dissolves the Enterprise Zone Agreement with Safety Today, Inc. and Meritex Columbus, LLC (the "EZA") as of December 31, 2006, with 2006 as the final tax year for the exemptions on real and personal property under the EZA, unless the tenant at the project facility, Kumho Tire USA, converts eight (8) of its temporary jobs to full-time permanent jobs, with the conversion accomplished or imminent by October 7, 2006.
Section 2. That the Director of Development is hereby directed to notify the necessary local and state agencies of any changes to the EZA.
Section 3. For the reasons stated in the preamble hereto, which is made a part hereof, this Ordinance is declared to be an emergency measure and shall take effect and be in force from and after its passage and approval by the Mayor, or ten (10) days after passage if the Mayor neither approves nor vetoes this Ordinance.