Youngstown council, schools at odds over tax break deal

A mistaken assumption and a misdirected legal notice leave a tax break in limbo.
By ROGER G. SMITH
CITY HALL REPORTER
YOUNGSTOWN -- Fallsway Equipment Corp.'s 10-year tax break would expire next year if things went as planned.
But little has followed the normal course in this tax abatement. To date, Fallsway hasn't seen a nickel of tax relief.
The result is a dispute between the city and school board in a time where the two sides are trying to smooth over other past tensions.
Nonetheless, city council and school board members say relations will improve despite the Fallsway issue.
"We'll get it out of the way and move on," said Clarence Boles, D-6th, chairman of council's education committee.
A main reason, he said, is because most council and school board members inherited the Fallsway case and had nothing to do with the problems.
History
The saga started in 1995.
Fallsway, of Akron, planned to invest about $1 million into a new facility on Salt Springs Road. The company sells and services items such as forklifts.
The city offered its standard 10-year, 75-percent abatement on real and personal property.
The company, however, decided to hold off on the project a little while for business reasons, said Jeffrey L. Chagnot, city development director. So, the city held back on approving the abatement until Fallsway was ready.
The company didn't open the new operation until 1998, but assumed the tax break had been approved years earlier and that it still applied, Chagnot said. That wasn't the case, however.
Fallsway notified the city after discovering in 1999 that the expected break hadn't been granted.
Legally, the city couldn't offer the same tax deal it had four years earlier because Fallsway already had built its facility, Chagnot said.
But the city could offer a different deal, called tax increment financing or a TIF. A TIF would give Fallsway a tax break equal to the value of the abatement that never took effect.
In 2001, the city came up with a TIF that would grant a 75-percent abatement on the company's real property tax for 15 years.
The problem
Trouble was that the proposed deal exceeded a cap on how much tax relief a city can offer without school board approval. Cities can't give tax breaks totaling more than a cumulative 750 percent without school approval. The city's new Fallsway proposal amounted to 1,125 percent.
City council sent the board of education a required legal notice giving school officials the chance to object to the proposed deal.
The school board did object, but returned the notice to the mayor's office -- not to council, Chagnot said.
Because council didn't get the school board's objection, the city law department gave the OK in 2002 to approve the 75-percent, 15-year tax break.
The tax break didn't go into effect, however, because the school board objected to the state tax commission when it found out the city had granted the deal.
The two sides now await a ruling after an administrative hearing conducted by the tax commission.
Working together
Meanwhile, council's education committee and the school board's legislative committee say they won't let the Fallsway case get between them.
There already is evidence of that. The two have worked amicably on another tax abatement.
The city wants the school board to grant an additional 25 percent tax break to help the financially struggling Sparkle Market on Market Street. The city granted the supermarket a 10-year, 75-percent tax break, but school board approval is needed for any larger abatement.
Approval is expected soon on the additional 25 percent, which would mean the Sparkle would pay no taxes, said Lock P. Beachum Sr., chairman of the school board's legislative committee.
Boles, a former school board member, said he wants to see that spirit of cooperation expand, not shrink back to the animosity generated over several tax issues in years past. So does Beachum, a former council member.
"The board and the city must get along for the city to advance," he said.
rgsmith@vindy.com