YOUNGSTOWN Allied faces trim of tax cut
A review board saw both the best and the most frustrating sides of companies' tax abatements.
By ROGER G. SMITH
CITY HALL REPORTER
YOUNGSTOWN -- Allied Consolidated Industries faces losing half its 100 percent tax abatement, but not because the company has a $2 million judgment against the city.
Instead, the board that reviews city tax abatements says it's suggesting the 50 percent cut because Allied hasn't met job-creation goals.
If the reduction is approved, the company would pay about $35,000 more a year in taxes.
The city's Tax Incentive Review Council recently reviewed the 52 companies that had abatements during 2001. Members look at compliance with job creation, financial investment and hiring goals. The board's recommendations go to city council, which can continue, change or take away tax breaks.
Job creation
The 2001 report says companies with tax breaks created 1,305 of the 1,499 jobs they promised. Companies retained 1,989 jobs.
The 2000 report said the 49 companies with tax breaks created 1,313 of the 1,389 jobs they promised and retained 1,797 jobs.
Companies with abatements generated 16 percent less, or nearly $300,000, in city income taxes in 2001 than the previous year. The report shows that such companies generated $1.85 million last year compared to $2.15 million in 2000.
Investments in real estate, equipment and inventory varied only a couple of percentage points from the previous year.
The tax review board recommended that most companies keep their abatements.
The panel still recommended continued abatements for some companies that didn't meet all goals. Those companies either were close to their projections or still early in their 10-year deals. Businesses have three years to meet their promised goals.
Action taken
The board wanted more information and deferred recommendations on two companies, McCourt Construction and Berry Distributing.
Three other businesses were put on probation for failing to meet either job or investment goals. They are Diver Steel City Tire Shredder, Entire-Enviro Inc. and United Foundries.
Only Allied faces a reduction.
Tax-review board members said a 50 percent tax-break reduction was appropriate because Allied has met its investment goals despite lagging on job creation. The board could have recommended revoking the entire abatement.
City officials emphasized that the company's abatement history -- not retaliation over the lawsuit and resulting big judgment -- was behind the reduction.
The company pledged to create 50 jobs in 1994 but through 2001 had hired only six people.
Allied already was on probation. The review board made that move the previous year for two reasons. First, the company failed to report hiring information on minorities and city residents. Second, Allied had continued failures in creating the promised jobs.
Industrywide woes cited
The scrap metal industry has been depressed for years, which the company has cited before for not making the planned hiring.
The company's lawyer, Chris Opalinski, said he can't help wondering if the judgment played a role in the reduction despite the city's assertions. Opalinski, however, said he wasn't familiar enough with the abatement to comment further.
The recommendation to reduce the abatement is subject to law-department review because of the pending legal case, said David Bozanich, city finance director.
About the feud
The 7th District Court of Appeals in September reinstated the $2 million judgment for Allied against the city. The city is appealing the decision. The Ohio Supreme Court is expected to rule in the next month or two whether to hear the case.
At issue is ownership of gravel along the bed of the former Pittsburgh & amp; Lake Erie Railroad. Each side contends it owns the gravel.
Allied won the $2 million verdict in Mahoning County Common Pleas Court in April 2000. A judge overturned the jury's award on technical grounds, however. That's when Allied appealed to the 7th District court.
Ups and downs
The tax board saw the best and most frustrating sides of abatements this year, said Jeffrey L. Chagnot, city development director.
On the downside, he pointed to Airborne Express. The company's 10-year, 75-percent abatement expired in 2001 after varying levels of compliance through the years, he said.
The company left its Salt Springs Road site in the city for North Jackson after taking full advantage of the tax break.
The upside, however, includes companies such as Boston Metal Products. The company has a 10-year, 100 percent abatement that expires this month.
The company has exceeded its job creation, investment and hiring goals and been a model corporate citizen, Chagnot said. He doesn't expect to see the company leaving the city anytime soon, either, he said.
The city will consider switching the accounting firm that audits companies with tax abatements.
Chagnot said there were at least six or eight reports that included seemingly inaccurate job or investment information.
Cohen & amp; Co. did the audits for 2000 and 2001. The city hired that firm because it offered the lowest price. There were no major problems with the 2000 report, but Cohen dedicated lower-level staffers to the city audit for 2001, he said.
rgsmith@vindy.com