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Amount of V&M taxes for 2 cities looks hazy
YOUNGSTOWN
Just how much revenue Girard and Youngstown will receive from the recently announced V&M Star Steel expansion depends on whom you talk to.
Girard Mayor James Melfi expects the construction of a $650 million expansion project by V&M to result in a windfall of $2.2 million —“on the low side” — over an 18-month period.
Youngstown Finance Director David Bozanich is considerably less optimistic about the revenue the cities will receive from a 2.75-percent income tax on the 400 construction workers for the expansion.
The V&M construction phase will bring in about $250,000 to Youngstown this year, and, at best, $500,000 more in 2011, he said.
“Everything is a guesstimate,” Bozanich said.
“I disagree with his numbers,” Melfi said.
Though some minor construction at V&M will start shortly, work will really get going in a few months, Melfi and Bozanich said.
As part of a deal for the V&M expansion, Girard allowed about 191 acres of property to be annexed into Youngstown.
In return, Girard will receive 55 percent of the income tax generated by those building the expansion. The 400 doing construction work at the V&M site as well as the 350 people the company expects to hire to work at the new plant will each pay a 2.75 percent income tax to be evenly split between the two cities.
During discussions last summer between the cities and V&M officials, the estimated income-tax revenue for the 18-month construction period was $5.5 million. Girard was to get $3 million and Youngstown was to receive $2.5 million.
But that was for a $970 million project rather than the scaled-back $650 million plan.
Though that will reduce the originally projected construction income tax, Melfi remains confident the work will bring in a large amount of income-tax revenue.
Girard receives about $3 million annually from its 2 percent income tax so the $2.2 million over 18 months from V&M would be a major increase for the city, Melfi said.
The mayor already has plans for the money he’s anticipating his city will receive. Girard would replace its four old trucks in the street department and half of the police department’s 12 cars, Melfi said. All of the vehicles are at least 15 years old.
Bozanich said a variety of factors — scaling back the V&M expansion, possibly completing the work more quickly than planned and doing some work off site — makes him strongly believe that millions of dollars aren’t coming to the two cities in income tax from construction workers.
Bozanich said his $250,000 projection for income tax collection tied to the V&M construction phase this year might be a little conservative. But he’s sticking with it.
If all goes well, Youngstown could receive $500,000 in income tax revenue next year, Bozanich said. However, that is far from a guarantee, he said.
Youngstown administrators expect $40.4 million in overall income tax revenue this year.
The V&M construction income tax revenue is important to Youngstown, which is facing a $2.5 million general fund deficit this year, but it’s not going to bail out the city from its financial problems, Bozanich said.
Once the new V&M plant is running by the end of next year, Bozanich anticipates the two cities will split about $600,000 to $700,000 annually in income tax.
Melfi estimates the annual income tax at only $400,000 to $450,000, but said he hopes Bozanich is correct.