Explanation
BACKGROUND: Columbus City Council (“COUNCIL”), on November 7, 2016, per Ordinance No. 0832-2015, authorized the City of Columbus (“CITY”) to enter into an Enterprise Zone Agreement (the “AGREEMENT”) with Hirschvogel Incorporated (the “ENTERPRISE”) for a tax abatement of seventy-five percent (75%) for a period of ten (10) years in consideration of a total capital investment of approximately $50.35 million, which included $14.7 million in real property improvements, over $35.5 million in machinery and equipment, and $150,000.00 in land acquisition related to the construction and expansion of its North American manufacturing operation facility consisting of approximately 65,000 square feet at 2230 S. Third Street Columbus, Ohio 43207, parcel number 010-112778 (the “PROJECT SITE”), within the Columbus City School District and the Columbus Enterprise Zone (the, “PROJECT”). Additionally, the ENTERPRISE committed to the creation of 37 net new full-time permanent positions with an estimated annual payroll of approximately $1.3 million and the retention of 322 full-time jobs with an annual payroll of approximately $14.35 million at the aforementioned PROJECT SITE. The AGREEMENT was made and entered into effective August 24, 2015 (EZA #023-15-103). The AGREEMENT stated that construction, on the improvements, (the, “PROJECT”) was expected to begin September 2015, with all real property improvements expected to be completed by December 2017, and no real property exemption was to commence after 2018 nor extend beyond 2027.
Subsequently, on November 7, 2016, COUNCIL passed Ordinance No. 2693-2016 which authorized the Director of the Department of Development to amend the AGREEMENT. The ordinance reduced the proposed capital investment expenditure from $50.35 million to $28.88 million and reduced the new job creation commitment from 37 net new full-time permanent positions to 30 net new full-time permanent positions, the estimated annual payroll for those positions from $1.3 million to $1.16 million. The amendment also added additional addresses and parcel numbers to the PROJECT SITE, and modified the dates of the construction of real property improvements from being expected to begin no later than September 2015, to begin no later than the end of December 2016. The expected completion date was also modified for all real property improvements from December 2017 to December 2018, and modified the term of the exemption from not to commence after 2018 nor extend beyond 2027, to not commence after 2019 nor extend beyond 2028. The First Amendment to the AGREEMENT was made and entered into effective January 13, 2017.
The CITY reported the status of the PROJECT to the 2024 Tax Incentive Review Council (“TIRC”) on August 23, 2024. The TIRC, noted from the annual report, that the net new jobs were below the job creation commitment per the AGREEMENT. The TIRC was advised that of all the jobs reported, none of the jobs could be classified as net new (per Section 5709.61(L) of the Ohio Revised Code and Section 2 of the AGREEMENT).
Based on the presentation of the annual report, the TIRC found the AGREEMENT to be Out of Compliance but recommended to “CONTINUE” and send ENTERPRISE a letter via Certified Mail requesting the ENTERPRISE work with the City of Columbus to right size the retained job commitment and develop a new jobs commitment. This plan is to be submitted to the City within 60 days of receipt of the letter or it could be dissolved.
A certified letter was sent to the ENTERPRISE on October 23, 2024 as recommended by the TIRC Board as well as an electronic mail communication. In the time since the letter was sent, the CITY, along with its regional partners, engaged in several conversations about the possibility of the ENTERPRISE expanding: therefore, creating a new job creation and retention commitment. Prior to receiving a jobs plan from the ENTERPRISE, the CITY learned from public statements given from Hirschvogel GMBH they have sold their subsidiary Hirschvogel Incorporated, which has been subsequently renamed Walor North America.
As a result, the ENTERPRISE materially failed to fulfill its obligations under the AGREEMENT by failing to meet its Program Compliance requirements. The ENTERPRISE failed to inform the CITY of the sale of the business to another entity, and the company was unsuccessful in completing and submitting the required annual compliance reporting for calendar year 2024, therefore, the tax abatement is to be dissolved for non-compliance.
This legislation is to authorize the Director of the Department of Development to dissolve the AGREEMENT between the CITY and the ENTERPRISE and to notify, as necessary, the local and state agencies of the dissolution.
This legislation is presented as 30-day legislation.
FISCAL IMPACT:
No funding is required for this legislation.
Title
To dissolve the Enterprise Zone Agreement with Hirschvogel Incorporated, and to direct the Director of the Department of Development to notify, as necessary, the local and state tax authorities of the dissolution. ($0.00)
Body
WHEREAS, the City of Columbus (“CITY”) entered into an Enterprise Zone Agreement (the “AGREEMENT”) with Hirschvogel Incorporated (the “ENTERPRISE”), approved by Columbus City Council (“COUNCIL”) on April 20, 2015, per Ordinance No. 0832-2015, with this AGREEMENT made and entered into effective August 24, 2015; and
WHEREAS, the AGREEMENT granted a 75%/10-Year abatement on real property improvements; and
WHEREAS, the incentive was granted in consideration of a total investment of approximately $50.35 million, which included $14.7 million in real property improvements, over $35.5 million in machinery and equipment, and $150,000.00 in land acquisition related to the construction and expansion of its North American manufacturing operation facility consisting of approximately 65,000 square feet at 2230 S. Third Street Columbus, Ohio 43207, parcel number 010-112778 (the “PROJECT SITE”), in Columbus, Ohio, within the Columbus City School District and the Columbus Enterprise Zone (the, “PROJECT”). Additionally, the ENTERPRISE committed to the creation of 37 net new full-time permanent positions with an estimated annual payroll of approximately $1.3 million and the retention of 322 full-time jobs with an annual payroll of approximately $14.35 million at the aforementioned PROJECT SITE; and
WHEREAS, the AGREEMENT was made and entered into effective August 24, 2015 (EZA #023-15-103); and
WHEREAS, subsequently, on November 7, 2016, COUNCIL passed Ordinance No. 2693-2016 which authorized the Director of the Department of Development to amend the AGREEMENT. The ordinance reduced the proposed capital investment expenditure from $50.35 million to $28.88 million, reduced the new job creation commitment from 37 net new full-time permanent positions to 30 net new full-time permanent positions, with estimated annual payroll for those positions from $1.3 million to $1.16 million. The amendment also added additional addresses and parcel numbers to the PROJECT SITE, and modified the dates of the construction of real property improvements from being expected to begin no later than September 2015, to begin no later than the end of December 2016. The expected completion date was also modified for all real property improvements from December 2017 to December 2018, and modified the term of the exemption from not to commence after 2018 nor extend beyond 2027, to not commence after 2019 nor extend beyond 2028. The First Amendment to the AGREEMENT was made and entered into effective January 13, 2017; and
WHEREAS, the CITY reported the status of the PROJECT to the 2024 Tax Incentive Review Council (“TIRC”) on August 23, 2024. The TIRC, noted from the annual report, that the net new jobs were below the job creation commitment per the AGREEMENT. The TIRC was advised that of all the jobs reported, none of the jobs could be classified as net new (per Section 5709.61(L) of the Ohio Revised Code and Section 2 of the AGREEMENT); and
WHEREAS, based on the presentation of the annual report, the TIRC recommended the AGREEMENT be continued, and for the City to send a letter to the ENTERPRISE requesting a jobs plan outlining the process for attaining the commitment of thirty (30) net new jobs with the jobs plan to be received by the City within sixty (60) days of receipt date of the notification, or the AGREEMENT could be dissolved; and
WHEREAS, a certified letter was sent to the ENTERPRISE on October 23, 2024 as recommended by the TIRC Board as well as an electronic mail communication. In the time since the letter was sent, the CITY, along with its regional partners, was engaged in several conversations about a possible expansion and a new job creation and retention commitment. Prior to receiving any sort of jobs plan from the ENTERPRISE, the CITY learned from public statements given from Hirschvogel GMBH, that the ENTERPRISE had sold their subsidiary Hirschvogel Incorporated, which has been subsequently renamed Walor North America; and
WHEREAS, the ENTERPRISE materially failed to fulfill its obligations under the AGREEMENT by failing to meet its Program Compliance requirements. The ENTERPRISE failed to inform the CITY of the sale of the business to another entity, and was unsuccessful in completing and submitting the required annual compliance reporting for calendar year 2024, therefore, the tax abatement should be dissolved for non-compliance and non-reporting; and
WHEREAS, it has become necessary in the usual daily operation this legislation is to authorize the Director of the Department of Development to dissolve the AGREEMENT between the CITY and the ENTERPRISE and to notify, as necessary, the local and state agencies of the dissolution prior to the end of calendar year 2025, all for the immediate preservation of the public health, peace, property, safety and welfare; and NOW THEREFORE,
BE IT ORDAINED BY THE COUNCIL OF THE CITY OF COLUMBUS:
SECTION 1. That Columbus City Council hereby dissolves the Hirschvogel Incorporated Enterprise Zone Agreement (EZA#023-15-103) as of December 31, 2024, which was to apply a 75%/10-year real property tax abatement to the value of real property improvements made to the PROJECT SITE within the Columbus Enterprise Zone.
SECTION 2. That the Director of the Department of Development is hereby directed to notify the necessary local and state agencies of any changes to the Hirschvogel Incorporated Enterprise Zone Agreement.
SECTION 3. That this Ordinance shall take effect and be in force from and after the earliest period allowed by law.