YOUNGSTOWN Income tax increase pushes companies out of downtown

A city official said he can't believe the tax would be a tilting factor in a company's decision to stay in Youngstown.
By DON SHILLING
and CYNTHIA VINARSKY
VINDICATOR BUSINESS STAFF
YOUNGSTOWN -- An increased city income tax made downtown too expensive for two young companies that recently left the Youngstown Business Incubator and moved to Boardman.
"It's disappointing," said Jim Cossler, the incubator director who has boosted his facility as one way of reinvigorating downtown.
Other tenants have said the increased tax will make it more likely for them to move outside the city when they leave the incubator, which provides free rent and services to fledgling companies.
City voters last month approved increasing the tax a half-percent to 2.75 percent.
Dan Policy and Dean Cicoretti, partners in Proscout Video, said they enjoyed being downtown at the incubator, especially being able to walk to lunch. The company has only four employees but is looking to add programmers and office staff.
As they prepared to leave the incubator, however, they found rents downtown were similar to that in the suburbs, which made the income tax a deciding factor. They just didn't see what benefits paying the tax would give them.
"Downtown is just not competitive," Policy said.
Tom Sailor, president and founder of X Vision Audio, said the income tax was one of several factors in the decision to move his eight-employee company outside the city.
"It was like giving my employees a raise because we don't have to pay income tax in Boardman," he said. "And we have free parking too."
Sailor said he understands that Youngstown's income tax is needed to support fire and police services, street services and other aspects of city operation, but he thinks new companies should be given a break.
"Maybe the city should consider eliminating city taxes for new companies as an incentive," he said. "It's not that often that a business wants to locate in Youngstown and invest in its community."
City's response
David Bozanich, city finance director, said the increased income tax is an insignificant cost in a company's total tax bill, including federal and state taxes.
"It's very hard for me to believe that factor will be a tilting factor in a company's decision," he said.
He said the city has a variety of incentives that it offers businesses to offset the income tax: forgivable loans, tax abatements, demolition grants, site acquisition grants, permit waivers and reduced utility costs.
The success of the city's industrial parks show that the incentive programs are working, he said. Companies that inquire about the industrial parks never complain about the income tax, he said.
The city has combined with the U.S. Small Business Administration to develop an incentive program that has helped small businesses, too.
Cossler said the incubator wants to offer a location for graduating tenants to encourage them to stay downtown, despite the tax.
Though the companies would pay rent, they would be located in a building designed for technology companies. These former tenants also would have access to resources at the incubator, including its high-tech conference room, database and software development tools.
The incubator has been given $2 million in state capital improvement funds that it intends to use for such a building. Cossler said he is trying for $1 million in federal funds to put toward the $5 million cost of putting up a building next to the Federal Plaza West incubator.
The rest of the money could come from more state capital funds or a loan, he said.
Cossler also is looking to renovate a Boardman Street building that's connected by a walkway to the incubator. This renovation would provide more space for regular incubator tenants.
Nine technology companies remain in the incubator, along with two other companies.