July 18, 2003
To: Charlie Luken, Mayor
David Pepper, Councilmember
John Cranley, Councilmember
I am writing you because I think it is important to be clear about the current situation since time is of the essence.
On Tuesday of this week in the Mayor's office, there was a meeting with Mayor Luken, Councilmembers David Pepper and John Cranley, and Asst. City Manager, Tim Riordan. We agreed on the key terms of an alternative incentive package from the City, which would address the concerns of a number of councilmembers about the use of job retention credits.
Mr. Riordan proposed the original economic incentive package to Convergys, which included $33.4 million in job retention credits, mirroring the State of Ohio's commitment. Mr. Luken who supported that proposal and both Messrs. Cranley and Pepper agreed that the package represented a significant value to the City. All of you indicated you were prepared to support an alternative solution which would eliminate the $33.4 million in job retention credits and replace them with an alternative that would equate to the approximately $21 million in net present value (NPV) that the City's $33.4 million in job retention credits paid over 15 years would represent.
Convergys proposed that the City could increase its up-front grants from $8 million to $11 million and fund the increase with the remaining TIF money available on Atrium I. Recognizing that we then had approximately $18 million in NPV to solve for, we suggested that rather than job retention credits, the City agree to a matching grant structure that would provide matching city dollars over the first three years of 15 cents for every dollar invested by Convergys in downtown up to a maximum match of $18 million. As you know our current plan is to invest $115-$125 million in downtown over that timeframe. Thus, the matching grant would represent approximately $18 million over that three-year period.
In line with your request, we also suggested that the City have a vehicle to recapture a proportional part of this grant money should Convergys fail to keep 1,000 employees in the City for 15 years. Such grant money would be amortized over the 15 years, and if for any reason Convergys did not keep 1,000 employees in Cincinnati, we would have to repay to the City one-fifteenth of the original grant money for every year less than fifteen we failed to meet that commitment.
There appeared to be a consensus among all present that this structure would not only meet Convergys' needs, but would also meet the City's needs, including the desire of councilmembers to eliminate job retention credits and hold Convergys accountable for its commitment to jobs and downtown investment. It would also represent the opportunity to put forth a package totaling approximately $50 million in grant money, which would still have sufficient value to Convergys to economically justify the commitment to keep and grow jobs and to invest over $100 million in downtown infrastructure.
It was the belief of the group that a majority of councilmembers would support the revised proposal. It was disappointing and discouraging to have the Asst. City Manager, Tim Riordan, present this morning to Convergys an alternative which fell approximately $18 million short in NPV of what was agreed to and what is needed. We remain committed to working over the next few days on an agreement, which will deliver the needed economic value both to the City and Convergys in line with what was described above, so that Convergys may move forward with Atrium I. Failing that, we will be forced to terminate our agreement with the owners of Atrium I, forfeit our options and reopen discussions regarding alternative locations outside the City of Cincinnati.
Gentlemen, please recognize we must come together very quickly or face a sad day in Cincinnati's history. Please help us achieve an agreement consistent with what we agreed in principle this week.
James F. Orr
Chairman, President & CEO
PS Messrs. Hawkins and McCammon stand ready anytime between now and Monday to prepare an agreement that can be shared in draft form with the Mayor, the Administration and City Council to gain support for a positive vote Wednesday or Thursday of next week.
City offer $18M shy of Convergys' liking
Text of Convergys letter
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