Explanation
BACKGROUND: This legislation authorizes the Director of Development to amend the existing C.O.W. Industries Inc. Enterprise Zone Agreement (EZA). C.O.W. Industries Inc. (COW) is located at 1875 Progress Avenue in the city's Southside. In 1999, COW wanted to increase its production capabilities for its primary customer, Lucent, which had promised COW 2-3 times more business if COW would expand and improve its paint line. COW committed to invest $550,000 in its facility, $850,000 for M & E (a state-of-the-art "green" paint line, i.e., environmentally-friendly) and $450,000 in new inventory. Columbus City Council approved an Enterprise Zone tax abatement of 50%/5-year on real property, M & E and inventory by Ordinance No. 35-00, passed on January 10, 2000. Several months later Lucent began to cancel contracts and a collapse was underway of the cellular telecommunications equipment manufacturing industry in the U.S. This industry has since migrated offshore. In 2003, City Council approved a first amendment to the EZA based on the Tax Incentive Review Council's (TIRC) recommendation to reduce the number of required jobs and extend the time to attain the jobs.
As a survival measure, COW attempted to sell its $1.5 million new paint line as well as other M & E. The paint line did not attract a single offer. The current fair market value of the paint line was determined to be far less that its $1.5 million acquisition cost since the market for such equipment simply disappeared. COW kept the paint line and for personal property tax purposes now reports its value as current fair market value rather than acquisition cost, and this is acceptable to the Ohio Department of Taxation. The TIRC recommended on August 11, 2004 that the City amend the EZA to acknowledge and accept that the company uses current fair market value for tax purposes while using the acquisition cost of the M & E to represent the Enterprise Zone project investment. The acquisition cost paid by COW does reflect the company's actual investment despite the fact that fair market value is far less. The City concurs with the TIRC recommendation. This legislation is presented as an emergency measure in order to meet the new deadline under State law for City Council vote on TIRC recommendations.
FISCAL IMPACT: No funding is required for this legislation.
Title
To authorize the Director of the Department of Development to amend the C.O.W. Industries Inc. Enterprise Zone Agreement to acknowledge and accept that for personal property tax purposes the company uses the current fair market value for the M & E while for Enterprise Zone reporting and compliance the company uses the acquisition cost of the M & E; and to declare an emergency.
Body
Whereas, the Columbus City Council approved the C.O.W. Industries Inc. Enterprise Zone Agreement (EZA) on January 10, 2000 by Ordinance No. 35-00 and amended the EZA by Ordinance No. 2652-2003 on December 8, 2003; and
Whereas, EZA as amended, calls for C.O.W. to invest a total of $1.85 million including $500,000 in real property improvements, $850,000 for new M & E and $450,000 for additional inventory, and to retain at least 38 jobs by December 31, 2005; and
Whereas, the EZA grants C.O.W. a 50%/5 year tax abatement on real property improvements and new personal property; and
Whereas, as of the end of 2003 C.O.W. had invested $1.9 million in real and personal investment, had stabilized employment and had managed to retain 21 jobs; and
Whereas, one of many cost savings measures C.O.W. implemented in order to survive was to use, for personal property tax purposes, current fair market value to represent the value of its recently acquired M & E; and
Whereas, the current fair market value of the M & E is considerably lower than the property's acquisition cost due to lack of interested buyers for C.O.W.'s M & E following the disappearance of U.S. cellular equipment manufacturing; and
Whereas, the use of current fair market value by C.O.W. has been accepted by the Ohio Department of Taxation and has resulted in personal property tax savings for C.O.W.; and
Whereas, these and other cost savings measures are helping C.O.W. to stablize its existing employment and increase the possibility to rehire former employees; and
Whereas, the Columbus Tax Incentive Review Council (TIRC) voted on August 11, 2004 to recommend that the City amend the EZA to acknowledge and accept that for tax purposes the company uses current fair market value for M & E while for Enterprise Zone reporting and compliance the company uses the acquisition cost of the M & E; and
Whereas, the City desires to preserve small manufacturing businesses and jobs in the central city and concurs with the TIRC recommendation to amend the EZA; and
Whereas, an emergency exits in the usual daily operation of the Department of Development in that it is immediately necessary to obtain City Council's vote in order to meet the new deadline under State law for voting on the TIRC recommendations, thereby preserving the public health, peace, prosperity, 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 C.O.W. Industries Inc. Enterprise Zone Agreement (EZA) to acknowledge and accept that for personal property tax purposes the company uses current fair market value for its M & E while for Enterprise Zone reporting and compliance the company uses acquisition cost.
Section 2. That for the reasons stated in the preamble thereto, which is made a part hereof, this Ordinance is declared to be an emergency measure and shall be in force from and after its passage and approval by the Mayor neither approves nor vetoes the same.