Explanation
BACKGROUND: This legislation authorizes the Director of Development to amend the existing ISG Columbus Coatings Enterprise Zone Agreement (EZA). Columbus City Council approved the EZA by Ord. No. 1985-99 on July 26, 1999. Columbus Coatings was granted a 50%/5-year tax abatement on new M & E (2001-2005) and agreed to invest $118,859,000 in M & E, $11,887,000 in real property improvements and to retain 95 existing jobs. Columbus Coating is located at 1800 Watkins Rd. on the city's Southside. The investment was to convert Columbus Coating's electro-galvanizing process technology to a state-of-the-art hot-dip galvanizing system. The conversion was completed in 2000 and, as anticipated, has helped Columbus Coatings stay competitive. LTV Steel and Bethlehem Steel were joint partners in the conversion project. In 2000, LTV declared bankruptcy and Bethlehem followed suit in 2001. In June of 2002, Bethlehem became sole owner of Columbus Coatings and in May 2003 all Bethlehem's assets were acquired by International Steel Group (ISG), Columbus Coatings became part of ISG. City Council consented to transfer the EZA to ISG Columbus Coatings by Ordinance No. 1913-03, passed on July 28, 2003. ISG's purchase cost for all the Bethlehem Steel assets nationwide was $1.5 billion, significantly less than the original historical cost of the assets. ISG Columbus Coatings used the 2003 purchase cost ($15,607,000) in its personal property tax return for the value of the M & E. This was accepted by the Ohio Department of Taxation. In the Enterprise Zone annual report, which the City uses to evaluate compliance with the EZA, the company used the original historical acquisition cost of the M & E ($123,049,208).
The Columbus Tax Incentive Review Council (TIRC) recommended on August 11, 2004, that the City amend the EZA to reduce the tax exemption on M & E from 50% to 25% for the final two years of abatement. However, the City does not concur with the TIRC's recommendation to reduce the rate of exemption. Instead, the City wishes to amend the EZA to accept the use of the historical value of M & E for Enterprise Zone compliance purposes, even though the company uses a lower value for the M & E in its personal property tax return. 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 ISG Columbus Coatings Enterprise Zone Agreement to acknowledge and accept that for purposes of Enterprise Zone reporting and compliance the company uses the historical cost of the M & E, while for personal property tax purposes the company uses the 2003 asset purchase cost; and to declare an emergency.
Body
WHEREAS, the Columbus City Council approved the Columbus Coatings Enterprise Zone Agreement (EZA) on
July 26, 1999 by Ordinance No. 1985-99; and
WHEREAS, the EZA called for an investment of $118,859,000 in new M & E as well as $11,877,000 in real property
improvements for the purpose of converting the existing Columbus Coatings plant to hot-dip process technology,
and for the 95 existing jobs to be retained; and
WHEREAS, the EZA granted a 50%/5 year tax abatement on the new M & E; and
WHEREAS, LTV Steel and Bethlehem Steel were joint partners in the plant conversion but in 2002 Bethlehem Steel
became sole owner; and
WHEREAS, in 2003, the Columbus Coatings assets were purchased by International Steel Group (ISG) as part a $1.5
billion purchase of all Bethlehem Steel assets nationwide and this asset purchase cost was significantly less than the
original historic acquisition cost of the assets; and
WHEREAS, Columbus City consented to the transfer of the EZA to ISG Columbus Coatings, by Ordinance
No. 1913-2003, passed on July 28, 2003; and
WHEREAS, in its 2003 Enterprise Zone annual report, ISG Columbus Coatings reported M & E investment of
$123,049,208 (original historical cost) but used ISG's 2003 purchase cost of $15,607,083 in the company's 2004
personal property tax return and this was accepted by the Ohio Department of Taxation; and
Whereas, the Columbus Tax Incentive Review Council (TIRC) recommended on August 11, 2004 that the City
amend the EZA to reduce the 50% rate of tax exemption to 25% in 2004 and 2005 due to the reduced value of the
M & E; and
WHEREAS, the City does not desire to reduce the rate of exemption but instead desires to amend the EZA to
acknowledge and accept that, for the purpose of EZA reporting and compliance, the original historical acquisition
cost of the M & E is an appropriate figure since it does reflect the amount invested, despite the company using the
2003 asset purchase cost in the personal property tax return; and
WHEREAS, an emergency exists 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 ISG Columbus Coatings Enterprise Zone Agreement (EZA) to acknowledge and accept that, for the purpose of Enterprise Zone reporting and compliance, ISG Columbus Coatings uses the original historical acquisition cost to represent M & E investment, while using the 2003 asset purchase cost in the personal property tax return.
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, or ten days after passage if the Mayor neither approves nor vetoes the same.