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Sunday, July 20, 2003

Convergys I: Make the deal


Anchor firm here

A whiplash week of Cincinnati City Council objections to offering Convergys job-retention tax credits left the deal on life support this weekend. Council members need to show some flexibility if they are to help Mayor Charlie Luken and City Manager Valerie Lemmie craft an acceptable alternative offer. In an election year, do they want to face the question: "Who lost Convergys?"

Loss of its headquarters downtown would be a body blow to the city. Matching incentive plans - $144 million from Ohio and $63.4 million from Cincinnati - total more than $207 million spread over 15 years. But Convergys CEO James Orr estimated, at Thursday's Enquirer editorial board meeting, that Convergys employees will still pay $130 million in city taxes during those 15 years, and Ohio will collect $275 million. Convergys also agrees to invest up to $125 million to buy and renovate the Atrium One tower to consolidate its Cincinnati workforce of 1,450. It commits to double that number to 2,900 and stay downtown for at least 30 years. At an average salary of $70,000, Convergys' downtown jobs are exactly the sort Gov. Bob Taft's Third Frontier project aims to attract. A top corporate giver, Convergys contributes about $4 million a year to community causes.

Orr said he's "quite comfortable looking at alternatives" to tax credits for Convergys' current jobs. Those credits would have cost the city $33 million in reduced earnings tax revenues. Since that's spread over 15 years, Convergys agrees the present value is only about $20 million, yet on Friday, Convergys refused a new city offer which company officials reportedly regarded as $17 million short of the earlier offer.

Convergys employs 48,000 worldwide. It shouldn't be hard for it to qualify for incentives, under which, the company benefits only if it keeps and adds jobs downtown. After 15 years, the tax credits end, and the city would collect full earnings taxes on the jobs. If Convergys leaves, the city collects zero. Ohio's offer also would die, since it requires a local match.

Orr doesn't want to waste more corporate dollars on options to buy Atrium One, if council won't deal. Kentucky will be glad to restart talks for a site there. Council should reshuffle the tax breaks to anchor Convergys downtown.




SPECIAL REPORT: THE CONVERGYS DEAL
Are cities at a disadvantage?
Cities face hard work trying to keep firms
Expert: Reform incentive policies
How city can cope
Convergys I: Make the deal
Convergys II: Incentives
Greg Harris: Regionalism must be our new focus
James Orr: Convergys deal is a defining moment

OTHER OPINIONS
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Homeless need a dose of empathy from their critics
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