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Corporate tax divides two cities in V&M talks
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Girard Mayor James Melfi
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Youngstown finance director David Bozanich
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Youngstown Mayor Jay Williams
A Girard city councilman says the two cities are ‘very, very close’ to an agreement.
YOUNGSTOWN — Youngstown and Girard are far apart when it comes to how much corporate-profit tax the two cities would share if V&M Star Steel decides to build a $970 million expansion, Girard Mayor James Melfi says.
The corporate-profit tax is a “major obstacle” in getting a deal done between the two cities, Melfi said Tuesday.
“Tax sharing is the primary issue of concern,” agreed Youngstown Finance Director David Bozanich.
The problem is determining the average annual profit tax paid to Youngstown by V&M for its Martin Luther King Jr. Boulevard plant in that city, Bozanich and Melfi said.
That amount needs to be determined to figure out how much additional revenue from the 2.75 percent tax would be shared if the addition is built.
The lower the average number, the more money Girard would receive.
The two cities are at least $625,000 apart on that average number, Melfi said.
But Girard Councilman Joseph Shelby, D-at large, council’s appointee for these discussions, said: “There’s not a gap as far as I’m concerned. We’re still in negotiations, but we’re very, very close. In a few days, it will be resolved.”
Shelby declined to discuss specifics.
Girard wants to use V&M’s corporate-profit tax from 2004 to so far this year, Melfi said. That amount is $3.325 million annually, Bozanich said.
However, Bozanich said that “baseline” number is too low and not accurate based on the business V&M has done since 2005.
Youngstown wants to use $4.105 million as a baseline average year, Bozanich and Mayor Jay Williams said. That’s a combination of the six years Girard wants to use and the $4.9 million annual average V&M paid Youngstown between 2006 and 2008.
“We’re seeking an average blending of profitable and less profitable years,” Williams said. “It takes the highs and the lows. This gives us a more realistic average. I’m confident that what’s been proposed is equitable and fair.”
Youngstown also offered another proposal: $3.95 million a year, V&M’s corporate-profit tax from 2005 to so far this year, Bozanich said.
“If you want six years, we want three [2006 to 2008] included,” he said. “If not, we’ll give the five years, which is how it should be done. It’s not fair to take the worst numbers.”
All amounts are adjusted for inflation.
V&M officials are insistent that a potential expansion be on property in Youngstown.
That requires 191 acres in Girard, largely the footprint for an expansion, to be transferred to Youngstown. Youngstown purchased the 191 acres in Girard a few months ago.
Melfi says he’s concerned about any deal because Girard is losing a lot of its property without a guarantee it would receive its fair share of tax revenue from the potential expansion.
The Girard mayor said an article about the lack of a deal that appeared in Tuesday’s Vindicator “brought the other side to the table. ... Mayor Williams makes it all sound pleasant, but there’s not an agreement. It’s a land grab. They got greedy.”
In response, Williams said: “We’ve been at the table. It’s always been 50/50. The rest of the comments don’t even warrant a response.”
Despite the rhetoric, Williams said, “There is progress being made, and a deal is in sight.”
V&M Star officials have repeatedly declined to make public comments on the potential plant and the negotiations between the two cities.
V&M is expected to decide by December or January whether it will move forward with the expansion project here. The company would employ about 400 new workers.
Youngstown and Girard city officials said V&M wanted this deal to be finished a while ago.
For the first time, Bozanich brought up in a Tuesday interview with reporters what could happen to the property if V&M doesn’t move ahead with an expansion.
The two cities could develop the land as a business park, sharing the revenue, he said.
The Youngstown Board of Control voted Tuesday to borrow up to $2,626,090 to pay for a portion of an improvement project to 110 acres needed by V&M for the potential expansion.
The Ohio Department of Transportation, overseeing this improvement project, will open proposals Thursday from companies for work on the 110 acres. That work includes expanding railroad lines, site excavation, site grading and construction of storm sewers.
The project is estimated to cost $8 million and is to be done no later than March 2010. The city is paying $2,626,090 if the proposal comes in at its estimate. It would be less if the proposal comes in under the estimate.
skolnick@vindy.com