COLUMBUS, Ohio (COLUMBUS BUSINESS FIRST)–Companies that have their property tax bills slashed under Columbus incentive agreements collectively didn’t shrink staffs, but failed to meet new job creation goals because of the coronavirus pandemic, according to the city Department of Development.
The city still came out ahead, however, because payroll for those jobs was far greater than estimated. That means more income tax, which represents 80% of Columbus revenue, compared with 6% from property tax.
Income tax withholding in 86 enterprise zone and community reinvestment area deals that were active in 2020 totaled $20.7 million from retained jobs and $4.4 million from new ones. Some of that flows out of city coffers if a worker lives in a suburb that also has an income tax.
Employers reported 8,800 jobs that pre-dated their incentives or were moved to the new site, more than the 8,000 promised, according to this year’s annual Tax Incentive Review Council report, sent Monday to City Council.
But they met 58% of new job targets: 3,700 out of a pledged 6,400. The total might be low because of late or missing reports from employers.
Rogue Fitness promised to create 90 new jobs at its headquarters and factory in Milo-Grogan, on top of moving 337. As of last year, it had created 805 jobs.
Other companies that far outperformed their deals: UPS has created 417 jobs when it committed to 25; NetJets Inc. created 173 new jobs on a pledge of 19, and Micro Center 51 jobs compared to five promised.
The employers collectively have spent $1.3 billion on construction and other property improvements, more than the $1.16 billion pledged, as of the end of 2020.
The review recommended dissolving only one agreement: Benderson Development Co. has not yet started construction on $8 million worth of planned light industrial buildings on Tussing Road. The developer could seek a new incentive when ready to go ahead with the project.
Another incentive was already dissolved in May, for “The Fort,” a more than century-old fire truck factory that Fortner Upholstering rehabilitated in 2019 to house its own and complementary businesses. The Franklin County Auditor revised how the property’s value was calculated before the deal, so there’s no increase to which the abatement can apply.
Neither company recognized any savings from the incentives.
Council members accepted the report’s recommendations, which also direct the Development Department to send follow-up letters on 19 deals to remind them of reporting requirements. One of those deals might be dissolved depending on the response.
Some incentives aren’t recording job creation yet because construction is still in progress. CoverMyMeds, for example, has created hundreds of jobs the past two years, but the property tax incentive is tied to the Franklinton headquarters that opened this summer.
The eventual savings will accrue to the new owner, Virginia real estate investment firm Golden Eagle Group Inc., which bought the first of two buildings for $120 million this spring. CoverMyMeds, owned by McKesson Corp., pays $8.6 million in annual rent, according to a regulatory filing.
Separately, CoverMyMeds has collected a cumulative $318,000 under a 2019 incentive based on a percentage of income tax withholding on new jobs within the city. As of the end of 2020 the software maker added 620 of 1,030 new jobs projected. It had two downtown offices before the move, and remote workers living in the city count toward the deal. Overall it has more than 1,500 employees statewide and working remotely.
Here’s how property tax incentives work:
- Owners pay 25% of their property taxes, or none at all, for terms of 10 or 15 years in exchange for real estate investment and employment commitments. Before a 1994 state law change, tax abatements did not require such promises.
- School districts and other taxing entities like libraries still collect on the value of the properties before the improvements, and deals can include some form of revenue-sharing to schools from income taxes.
- The city also is required to split with schools any net new income tax withholding after the first $1 million yearly from a single project, which would be the 2.5% in taxes after the first $40 million in added payroll. The only one coming close to that is Rogue.
Columbus City Schools had collections reduced by $3.2 million in fiscal 2020, offset by $890,000 in payments in lieu of taxes, because of incentives in the city, Franklin County and Hamilton Township, according to the district annual report. Property tax collections totaled $324.5 million, about a third of its budget.
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