Explanation
BACKGROUND: This legislation authorizes the Director of Development to dissolve two tax incentive agreements with International Business Machines Corporation (IBM). IBM requested that the two agreements be terminated because it will be unable to comply with the required level of job retention and creation due to the loss of a key contract.The two tax incentives, which were granted in 1999, are a 60%/10-year Enterprise Zone abatement on real and personal property and a municipal jobs creation tax credit of 50%/10-years on new jobs. Both incentives were authorized by Columbus City Council Ordinance No. 774-99, which passed on March 29, 1999. The City granted the two tax incentives in order to capture a proposed expansion by IBM at its 4499 Fisher Road facility (west side). The expansion was based on an outsourcing contract IBM was awarded to operate the Bank One data center. After the City granted the incentives, IBM invested $98.4 million in real property improvements and new personal property and ran the data center for several years. This investment amount surpassed what the Enterprise Zone Agreement required ($84 million). Bank One decided in 2002 to take its data center back in-house. As a result, IBM will not be able to attain the required level of job retention and creation and, consequently, has requested that the City terminate the tax incentive agreements. IBM has approximately 391 jobs at the project site whereas the tax incentive agreements call for 670 jobs. IBM has not utilized its municipal tax credit but has saved $939,000 due to the Enterprise Zone property tax exemptions on new investment. However, during the same time period IBM paid taxes of over $5 million on the non-abated real and personal property at the project site.
FISCAL IMPACT: No funding is required for this legislation.
Title
To authorize the Director of Development to dissolve the Enterprise Zone Agreement and the Tax Credit Agreement with International Business Machines Corporation (IBM), and to end the related property tax exemptions and tax credit, with or without the written consent of IBM; and to declare an emergency.
Body
WHEREAS, by authority of Columbus City Council Ordinance 774-99, the City entered into an Enterprise Zone Agreement (EZA) and a Tax Credit Agreement (TCA) with International Business Machines Corporation (IBM) on March 30, 1999; and
WHEREAS, the tax incentive agreements called for IBM to invest approximately $84 million in building improvements and new personal property at 4499 Fisher Road in Columbus, and to retain 440 existing jobs and create 230 new jobs; and
WHEREAS, the EZA granted a 60%/10-year tax abatement on real property improvements and new personal property, and the TCA granted a 50%/10-year jobs creation tax credit on the jobs created and/or new to Columbus; and
WHEREAS, IBM's plan to expand, invest and create/retain jobs at the Fisher Road project site depended on a outsourcing contract IBM received from Bank One to operate the bank's data center and to provide other information-technology (I/T) services; and
WHEREAS, in 2002 Bank One decided to bring the data center back in house along with the other I/T services IBM had been contracted to supply; and
WHEREAS, IBM has been able to retain only 391 jobs and the company has determined that in the future it will not be able to attain the job retention and creation called for in the tax incentive agreements and has therefore requested the City to dissolve the EZA and the TCA; and
WHEREAS, since 1999, IBM invested $98.4 million at the project site, realized a tax savings of approximately $939,000 due to the EZA abatement, paid approximately $5.4 million in taxes on the non-exempt real and personal property, and did not utilize its municipal tax credit ($0); and
WHEREAS, the City recognizes that IBM has made substantial investment at the project site and also agrees that IBM will not be able to meet the job retention and creation levels called for in the EZA and the TCA;
WHEREAS, an emergency exists in the usual daily operation of the City in that it is immediately necessary to dissolve the Enterprise Zone Agreement and the Tax Credit Agreement with International Business Machines Corporation (IBM), and to end the related property tax exemptions and tax credit, with or without the written consent of IBM, all for the 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 the Director of Development is hereby authorized to dissolve the Enterprise Zone Agreement (EZA) and the Tax Credit Agreement (TCA) between the City and International Business Machines Corporation (IBM) and to end the associated real and personal property tax exemptions and the municipal tax credits, with or without the written consent of IBM. The final year for the real and personal property to be exempt is tax year 2002 (collection year 2003). If IBM agrees in writing to the dissolutions, the Director of Development shall agree to not attempt to reclaim property taxes forgone in past years as a result of the EZA abatement.
Section 2. That for the reasons stated in the preamble hereto, which hereby made a part hereof, this ordinance is hereby 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 days after passage if the Mayor neither approves nor vetoes the same.