Wednesday, July 11, 2001

Some fail to keep tax-break promises

21% of companies haven't met job creation, investment goals

By Dan Klepal
The Cincinnati Enquirer

        Businesses have failed to honor their obligations to add jobs or invest money in more than 21 percent of the tax-break deals given by Hamilton County government.

        A new audit, prepared by the Tax Incentive Review Council on behalf of the county's Office of Economic Development, looked at all 121 active tax-abatement deals in the county.

   According to an audit by the Hamilton County Tax Incentive Review Council, these companies are not in compliance with the terms of their tax abatement contracts:
   • Cincinnati Electric Inc., Reading
   • General Tool Co., Reading
   • Vulcan Oil and Chemical Products, St. Bernard
   • Siemens Energy and Automation, Norwood
   • US Playing Card Co., Norwood
   • Ohio Valley Flooring, Fairfax
   • Champion Screen Printing Corp., Fairfax
   • Steel Summit-Ohio, Forest Park
   • OKL Can Line, Forest Park
   • Grow LLC/DEI Inc., Forest Park
   • Corporate Document Solutions, Forest Park
   • Paper Manufacturers Co., Forest Park
   • Edwards Products, Forest Park
   • Besse Medical Services Inc., Forest Park
   • UTM Distributing Co., Springdale
   • Amko/Ampac Plastics, Springdale
   • Ohio Machinery, Sharonville
   • Federated Corporate Services, Sharonville
   • Jorgensen Steel & Aluminum Company, Woodlawn
   • Mohawk Machinery, Woodlawn
   • Alex Fries and Bros. Inc., Woodlawn
   • Watkins Manufacturing, Evendale
   • Gold Medal Products Co. Inc., Evendale
   • RPC Mechanical Inc., Evendale
   • Bayer Corp., Addyston
   • Stop Stick Ltd., Harrison

    Companies that did not respond to requests for information from the council were:
   • General Tool Corp/Southland Properties LLC, Reading
   • Meridian Diagnostics (three contracts), Newtown
   • Direct Source International Inc., Newtown
   • Henkel Corp./Cognis Corp., St. Bernard
   • Procter & Gamble Co., St. Bernard
   • A.F. Schuerman Co., Elmwood Place
   • C.W. Zumbiel Co. (three contracts), Norwood
   • Texo Corp., Norwood
   • Faxon Machining Inc. (three contracts), Forest Park
   • WNJ Properties Inc., Forest Park
   • GTE Mobilenet Inc., Springdale
   • International Paper (three contracts), Springdale
   • Ford Motor Co., Sharonville
   • S.K. Rigging Co., Sharonville
   • Fisher Controls International Inc., Sharonville
   • Hollaender Manufacturing Co. (two contracts), Woodlawn
   • CDC Distributor, Inc./Medallion Drive, LLC, Evendale
   • Cincinnati Color Press Inc., Evendale
   • Durham Business Forms Corp., Lincoln Heights

        The report found 26 companies did not meet their job or investment targets.

        Another 19 companies, representing 28 tax-break contracts, didn't respond to requests for information. An additional 11 companies were out of compliance but are still within a three-year grace period to meet their obligations.

        County commissioners say they will crack down on companies that don't fulfill contracts. They may rescind the agreements and, in some cases, demand the companies pay back some of the tax money they would have paid if not for the tax breaks.

        “To me, it's a question of saying: This is what you've agreed to. We'll give you an extension, but if you don't live up to it, we'll take it back,” Commissioner John Dowlin said.

        The tax incentive review committee has suggested rescinding two agreements, reducing exemptions for six companies, sending out seven “warning” letters and 18 “reminder” letters to those companies out of compliance.

        Most of the companies flagged in the audit had trouble creating the jobs they promised.

        Ted Wahl, president of Champion Screen Printing Corp. in Fairfax, said the economy had a lot to do with his company falling 30 employees short of its promise to retain 60 full-time permanent positions and create 10 more.

        “We were doing all right until two years ago when companies we do business with starting leaving or going bankrupt,” Mr. Wahl said. “We didn't lay anyone off, but we couldn't hire new people even when we lost some due to attrition.”

        The council recommends cutting Champion's real estate tax break from 50 percent to 40 percent.

        Fritz Grevlich, president of Watkins Manufacturing, said his Evendale company is in the same boat as Champion.

        Mr. Grevlich said the slowing economy is to blame for his company being nine employees short of its goal to create or retain 29 full-time positions.

        “I'm grateful we're doing as well as we are. We haven't had to lay anyone off,” Mr. Grevlich said.

        Watkins Manufacturing received a 75 percent tax break on a $905,000 investment. Watkins will receive a warning letter.

        Commissioner Todd Portune said the audit calls into question the validity of the entire program.

        “The fact is, many of these companies are just putting their hands out to get what they can get, and shifting a greater percentage of the burden on citizens who don't have political clout to ask for special treatment.”

        Commissioners Dowlin and Tom Neyer say Hamilton County is competing with the rest of the world to lure and keep businesses.

        Tax abatements have resulted in $1.8 billion in investments since 1985, said Harry Blanton, the county's economic development manager.

        Tax breaks are a necessary evil, Mr. Dowlin said.

        “I wish there was no such thing, but there is,” Mr. Dowlin said. “In most cases, we're playing a game of chicken — the company says if they don't get (the tax break) they'll leave the area.”

        Mr. Neyer said the agreements will be enforced.

        “A deal is a deal,” Mr. Neyer said. “I understand that sometimes business plans don't pan out. But we gave those benefits expecting a certain return.”

        Commissioners are expected to draft a policy on how to handle companies not in compliance in the coming months.

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