Wednesday, July 3, 2013



Although the economy is improving in the city of Canton as evidenced by tax collections picking up, Canton city government is in no shape to be giving away future revenues.

Canton taxpayers should be pleased to learn that on Monday night council apparently smoked out Corporex Capital on its request that council agree to a 10 year, 75% Real Property tax exemption.

Smoked out?

Yes, that's the SCPR's take.

Canton council president Allen Schulman (joined by several other councilmen including Kevin Fisher (D - Ward 5) several weeks ago initiated questioning of a Corporex Capital company representative at a Council of the Whole meeting designed to get a straight forward answer as to whether or not the company was going to use local workers to construct a planned hotel (perhaps a second) at the intersection of Faircrest and I77.

Knowing Schulman and Fisher and their political biases, The Report infers that "local workers" from them means local "organized" labor workers.

Also a part of Schulman's line of questioning of whether or not the incentive was a difference maker in the project going forward in the first place.

Well, take a look at this from Monday's Canton City Council agenda:

Postponed indefinitely!

Which likely means one of two things:

  1. The incentive is not a difference maker, but it is fashionable for American business and industry to ask for them these days inasmuch as government seems to be handing them out like "free" candy, or
  2. The incentive is not a difference maker, but hiring union workers is.
The message delivered by Canton City Council members is "yes" they have and will continue to offer incentives for business, commerce and industry to locate within Canton's economic development sphere BUT there must be jobs produced which generate long term income tax benefits if not other body politic benefits which exceed the tax abatement incentive given.

At the end of the day, if properly done, tax and other incentives provided by local governments must be win-win.

North Canton, on the other hand, offers an example of "improperly done" (in the opinion of the SCPR) tax incentives.

Back in 2009 Acme Freshmarket did some renovating and expansion of its grocery store on North Main Street.

The F.W. Albrecht Company was going to do the work and had no idea that they were "out of fashion" in the sense that they did not go first to North Canton government and try to wring a tax incentive out of the representatives of North Canton taxpayers.

In the end, the Albrecht folks did not have to ask.

How's that?

At the time, Daryl Revoldt (now with the Ohio Department of Economic Development - to the extent that Ohio government is still into economic development as a government function) as president of North Canton's council pushed for North Canton's economic development people to contact Acme and tell them that in line with Revoldt's "anticipatory business friendly environment"  (translated:  "we want to show you how much we love you even though you haven't doubted that we do"):
  • North Canton had a $6,500 property tax abatement for the grocery store operation for the mere asking.
Of course, the Albrecht company asked and as it is said "the rest is history."

Although The Report understands Revoldt's thinking, yours truly does not believe that such is an appropriate way to operate with taxpayer dollars.


Because there is no "but for."

But for?


Had the Albrecht company gone to North Canton and said we would like to spend $1.2 million upgrading our North Canton facility however unless we can save $6,500 in real property taxes it is a no go.

And by the way, if we go ahead with the project, it is likely that the reworked facility will attract enough new customers which could well result in our hiring additional workers.  

Would that make sense to North Canton taxpayers?


A win-win.  Acme improves it business model and makes more profit.  North Canton gets more tax revenues over the long haul exceeding the $6,500 loss in taxes because new jobs are likely created out of the company's increased gross revenues.

The "anticipatory business friendly environment" model is just a good ole fashion giveaway that is never going to be quantifiable in terms producing positively for the taxpayers.

And then there is the Massillon model.  (LINK to prior SCPR blog on topic)

This is the model in which in depth and far ranging economic analysis was at the outset missing.  

With the Cicchinelli administration it was the ill advised foray into the golf course business which certainly became compounded ill-advised with the addition of the final nine holes.

Added to the golf course as not being well-thought-out (especially the additional nine holes) is the Hampton Inn project as well as the 59 Duncan Place apartment complex.

Massillon continues to struggle with making a break-even transactions out of all three of these ventures.

Massillon's mayor and her economic development administrators do not appear to have a clue of how to creatively construct an exit plan which minimizes Massillon taxpayer losses let alone reach a hoped for nirvana point of breaking even.

Only Cicchinelli's annexation program seems to have produced positive results.  And that may be appearances rather than reality.  With annexation comes the costs connected with provided services to the annexed areas.

The real question with annexation is what do financial ledgers show in terms of revenues taken in as compared to additional costs incurred.

A sure winner on the the positive revenue side was the R.G Drage annexation.

Otherwise, yours truly suspects that annexation is not really a sustainable economic development model. It likely is front end heavy with revenues but back end heavy with services costs.  The end of annexation is that in time there is nothing to annex.

An area of economic development which is highly suspect in terms of accountability is the viability of Tax Incentive Review Councils (TIRC) to inform taxpayers whether or not tax incentives have been worthwhile for the taxpayer.

Alliance, Canton, Massillon and North Canton have their own TIRCs.

The SCPR has taken in a number TiRC reports given at Stark County commissioner meetings on an annual basis.

A favorite story of yours truly is the Brewster Dairy TIRC process.

In 1999 the dairy signed a 10 year $2.7 million in taxes savings agreement with Stark County whereby it promised to retain 135 employees for the first five years and 125 for the second five year stint. Moreover, the company agreed to invest $1.75 in real property and $7.5 million in personal property expansion expenditures.

Brewster Dairy complied with its promises throughout the ten year cycle.  In fact, it exceeded the real property investment by $1.25 million in realty and $4.5 million in personal property.

Now the TIRC agreement is expired.

An unqualified success, no?

Not so quick.

The SCPR believes that nobody really knows the answer.

A gnawing question has to be:  would Brewster Dairy have retained the 135/125 employees without Stark County taxpayers anteing up $2.7 million?

The implication of the retention of the employees and the investment in expansion real estate and personal property is that "in and of themselves" those factors indicate a net gain for the taxpayers above and beyond the $2.7 million taken from county revenues.

But the SCPR again says:  "no so quick."

What self-respecting financial guy would accept an implication as proof that the company won and that the taxpayers won too in quantifiable context?

To the SCPR, TIRCs are somewhat of a joke if one thinks they are a measurement of taxpayer benefit.

All that TIRCs can honestly say is to be is a tracking mechanism  of whether or not the terms of an agreement of being met year-in, year-out so that a participating company is not subject to a claw back of taxes not paid.

As far as The Report can tell, TIRCs are a suggestion of community economic benefit to the taxpaying body at large.  Yours truly fails to see how TIRCs are constructed to quantify whether or not the agreements result in net taxpayer loss or gain as measured against specific number of dollars not collected into - in the case of Brewster Dairy - the county treasury.

And the question is how effective are the members of the TIRCs in holding companies' feet to the fire in terms of contract compliance.

The only Stark County official that has impressed the SCPR in this regard is Commissioner Janet Creighton.

And finally this.

Taxpayers are about to get even less accountability.

Stark County state Senator Scott Oelslager (R - the 29th District - Plain Township) slipped into the recently enacted 2014/15 state biennium budget language that empowers local government officials to go into executive session when discussing economic development matters.

Overall it appears to the SCPR that Ohio and many local governments have the wrong approach to economic development in that the ways and means lack:
  • accountability, and
  • transparency
So it is something to cheer about that Canton City Council in using "the right approach" grounded in due diligence just may have avoided giving away hard earned taxpayer dollars in that it appears:
  1. It is not needed for the project to go forward, and
  2. The company will not commit to hiring in the construction phase local "union?" workers.
Another aspect of "negative-net" economic development project  is that they cost the affected community in yet another dimension:  the loss of public school revenues.

Yet another reason why communities need to be much more scrutinizing about the overall ramifications of jumping on board to this or that hyped economical development project.

The Report's focus Canton council's probing of the Corporex project (as compared to the North Canton example) is intended to show an example of legislators making sure that economic development subsidies do not result in giving away taxpayer dollars for very little if anything in return.

Hence, a  SCPR "hats off: to the Canton City Council it its exercise of due diligence on behalf of the taxpaying public!

No comments: