Explanation
BACKGROUND: The Tax Incentive Review Council (TIRC) recommended on August 25, 2006, that the Enterprise Zone Agreement with Superior Production Partnership ("Superior") be amended to reduce the job creation goal to 24 jobs, to extend the period for the job creation to December 31, 2009, to acknowledge that the project investment has been larger and taken more time than initially anticipated and to extend the investment period to June 30, 2005 so that this investment is eligible for the exemptions under the Enterprise Zone Agreement with Superior ("EZA"). This legislation authorizes the Director of the Department of Development to amend the EZA accordingly.
The EZA was authorized by City Council on July 14, 2003 and was entered into effective November 3, 2003. Superior is a die and stamping manufacturer that was founded in Columbus in 1914 and is located at 2301 Fairwood Avenue in the city's south side. The EZA project is an expansion to support a new vehicle hood line. The EZA calls for a total of $4.8 million in investment, including $300,000 in real property acquisition, $1.5 million in real property improvements, $450,000 in new machinery and equipment and $50,000 in new furniture and fixtures. Existing average value of inventory, $2.5 million, is be retained at the project site. It was anticipated that the project investment would be completed by February 2004 and that 129 jobs would be retained and 32 jobs created by December 31, 2006. The EZA grants a 60%/7-yr abatement on real property improvements and new personal property.
Superior brought the first of its new vehicle hoods to market in 2004 at which time a group of Taiwanese companies launched stiff price competition and have captured one of Superior's major U.S. customers. The labor costs of the Taiwanese companies are at most one-fifth of what Superior pays. The company decided that to meet this challenge it had to develop a larger production capacity than initially planned and instead of installing 1 press, 4 new presses were installed. Instead of the initially planned $4.8 million investment, Superior invested a total of almost $5.7 million, including $283,000 in real property acquisition, $2.22 million in real property improvements and $654,000 in machinery & equipment, $0 in F & F. The company will retain the $2.5 in existing average value of inventory and could add $1 million in new inventory. The project has taken longer than anticipated to complete due to the larger scale of expansion. Superior's job creation was initially ahead of schedule but the pressure from the Taiwanese competitors has made it critical for Superior to control costs. As of August 2006, thee were 121 jobs retained and zero jobs created. Superior refuses to cut wages or benefits, but needs to scale back its anticipated job creation from 32 jobs to 24 jobs and will need until the end of 2006 to regain the job retention level of 129 jobs and until the end of 2009 to create the revised job creation goal of 24 jobs.
FISCAL IMPACT: No funding is required for this legislation.
Title
To authorize the Director of the Department of Development to amend the Enterprise Zone Agreement with Superior Production Partnership to reduce the job creation goal and extend the period for the job creation, to acknowledge that the project investment has been larger and taken more time than initially anticipated and to extend the investment period and make the investment eligible for the abatement; and to declare an emergency.
Body
WHEREAS, the Columbus City Council approved an Enterprise Zone Agreement with Superior Production Partnership (the "EZA") on July 14, 2003 by Ordinance No. 1696-2003 and the EZA was entered into effective November 3, 2003; and
WHEREAS, the EZA provides for a 60% /7-year tax abatement on the project investment of Superior Production Partnership ("Superior"), including real property improvements, new machinery & equipment and furniture & fixtures expected to be completed by February 2004 and on new inventory; and
WHEREAS, Superior agreed to invest $1.5 million in real property improvements, $450,000 in machinery & equipment, and $50,000 in furniture & fixtures by February 2004 but has instead invested $2.22 million in real property improvements, $654,000 in machinery & equipment, and $0 in furniture & fixtures; and
WHEREAS, Superior does not wish to cut wages or benefits for its employees but is fighting to retain its U.S. customers in the face of intense price competition from a group of low-cost offshore producers; and
WHEREAS, Superior needs until the end of 2006 to regain the level of 129 retained jobs and also needs to scale back its anticipated level of job creation from 32 jobs to 24 jobs and to extend the time for the job creation to the end of 2009; and
WHEREAS, Superior has needed to develop a larger production capacity than initially planned and has invested a total of almost $5.7 million, including $283,000 in real property acquisition, $2.22 million in real property improvements and $654,000 in machinery & equipment, $0 in furniture & fixtures, will retain the $2.5 in existing average value of inventory and could add $1 million in new inventory; and
WHEREAS, the Tax Incentive Review Council (the "TIRC") has recommended that the City amend the EZA to modify the project's job creation numbers and investment amounts and categories, to extend the time allowances to complete the job creation and investment, and to allow Superior to receive the tax benefits for the full amount of its project investment; and
WHEREAS, the City concurs with the TIRC recommendation and desires to amend the EZA accordingly; and
WHEREAS, the City wishes to clarify that the tax benefits do not apply to the $2.5 million value of inventory that existed at the time the EZA was entered into; 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 the Director of the Department of Development is hereby authorized to amend the Enterprise Zone Agreement with Superior Production Partnership (the "EZA") by requiring the job retention to be attained by December 31, 2006, by reducing the job creation to 24 new jobs created by December 31, 2009; by revising the project investment amounts to $2.22 million in real property improvements, $654,000 in machinery & equipment and up to $1 million in new value of inventory, extending the investment period to June 30, 2005 and clarifying that the revised investment amounts are eligible for the tax exemptions under the EZA; by eliminating the furniture & fixtures investment and exemption; by clarifying that $2.5 million in inventory value that existed at the time the EZA was entered into is not eligible for the exemptions; and by allowing the exemptions to commence not later than tax year 2006.
Section 2. 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.