Thursday, July 10, 2003

Convergys: Keep HQ downtown

Make deal happen

Ohio and Cincinnati have placed on the table extraordinary matching incentive packages to keep one of Cincinnati's largest employers from leaving downtown for Boone County, Ky.

Some Cincinnati City Council members, still smarting over a $15 million deal for Kroger's parking garage, bristle at bidding against Kentucky over one of our prize employers. Council worries which firm will be next to demand a deal. For the tax credits, Convergys must commit to stay downtown for twice the length of the incentives - at least 30 years. However painful, the deal is necessary, at a time when this city, as Mayor Charlie Luken puts it, is "transitioning from a place where people need to be to a place where people want to be." Council should approve it.

Ohio agreed on June 30 to a $144 million package of tax credits, grants and loans for Convergys, and now Cincinnati City Council must decide on similar incentives totaling $63.4 million. In return, the Cincinnati-based customer billing and management firm would commit to invest at least $100 million to buy and renovate the Atrium One tower for its world headquarters, add 225 new jobs in the first three years and as much as double its local work force of 1,450 in 15 years.

If the company were to relocate, it would mean the loss of high-salary jobs, $4 million in lost city income tax revenue and a glut of downtown office vacancies. Its jobs, currently averaging $73,000 a year, are exactly the sort needed to sustain a recovering downtown. Downtown headquarters support law firms, accountants and other suppliers. And the deal is incentive-based: It rewards if Convergys adds jobs and imposes penalties if it fails to deliver. Convergys lost more than 400 local jobs last year. The former Cincinnati Bell subsidiary employs about 45,000 worldwide. It wants to consolidate all local employees in one building. Buying Atrium One would end its two-year search of a half-dozen sites in the region. Luken expects the investment will make Convergys even more of a downtown advocate.

He also has asked the Greater Cincinnati Chamber of Commerce to see if Tristate employers could agree to some reasonable limits on pitting state against state in bidding for companies already in this region. Kentucky has created a super tax increment financing district to pool bigger pots of cash for incentive offers. It's one thing to compete for prospects from outside the Tristate, but another to cannibalize each other. Some sensible voluntary restraints would relieve taxpayers here from getting stuck with the bill for bid-up incentive offers.

But the Convergys deal can help stabilize downtown Cincinnati. Council should make it a done deal.

About the package

A $4 million city grant in 2003 to help buy the headquarters property.

City performance grants totaling $4 million for adding new full-time jobs: $2 million when Convergys jobs number 1,675, another $1 million at 1,900 jobs and $1 million more at 2,125 jobs.

The job creation tax credits would result in an estimated net gain in city income tax revenues ranging between $50,000 to $730,000 a year. The job retention tax credits would result in an estimated net loss in city income tax revenue between $1.7 million to $2.8 million a year.

Tax credits end after 15 years, but Convergys commits to stay downtown for 30 years.

Convergys commits to hiring at least 10 percent disadvantaged or minority persons for the new jobs. It must make "reasonable efforts" to fill at least 75 percent of the new jobs with city of Cincinnati residents.

After buying Atrium One, the company will drop the current owner's lawsuit challenging the city's demolition of the "skybridge" over Fort Washington Way.

The city agrees to sell to Convergys a small, city-owned parking lot on Third Street at a price of $75 per square foot.

The Ohio incentives include a $6 million loan to Convergys to finance machinery and equipment, and up to $2.7 million in training grants.

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