Glass City Jungle

There were a few items that created a large amount of discussion, in the Agenda Review for Toledo City Council on February 10th, one is a topic that was blogged about here, the Health Care REIT tax credit/incentive package.

84-09 Approve Municipal Job Creation Tax Credit for Health Care REIT, 7 years at 40% of income tax
85-09 Approve Toledo Expansion Incentive (TEI) for Health Care REIT, 10 yrs at 10% growth in income tax
86-09 Approve property tax exemption for Health Care REIT, 12 years at 100% of increase in valuation

The deal the Mayor wants to give Health Care REIT was discussed by Dave Amstutz who started out saying how long it had been before he came before Council with such a large expansion deal and how tough it had been, stating that all of these incentives would have them keep all 68 and add 40 new employees, 8 during the first year (the state reported 45 new jobs). He said the average yearly salary will be $100,000 per person which is why they think it’s a significant job project. At one time they were only located in Toledo but now they have offices in Jupiter, Florida, Indianapolis and Nashville. State gave them 60% job creation tax credit for 7 years with the value of 510,000 one of the conditions of the approval is that the City of Toledo approve it’s municipal job tax creation (The state also gave them $315,000 for remodeling) of 40% for a match of 7 years like the State did. The City’s portion of the tax credit will be worth 280,000 over 7 years, in the event that the credit is larger than their corporate tax obligation, they do not get the credit. There is an annual reporting period with benchmarks in order to get the tax credit each year.

Amstutz thinks in these trying times we have to encourage companies to expand in Toledo. He repeated that these are trying times several times. Councilman Michael Ashford asked about a statement written on the back of the proposed legislation that stated “a payback to the school system would be required.” Ashford asked if the school system had signed off on this, Amstutz said yes they have, I found this personally to be very interesting because I spoke to two Toledo Public School Board members when this was reported in the media on Monday, the 9th, neither one knew anything about this. He stated that the School Board passed a resolution on this, which raises even more questions for me. He said 67% of the tax amount that would had been paid had there been no tax abatement would go to the schools and Health Care REIT agreed to this. Amstutz stated a meeting had happened last Tuesday with Dan Romano and Paul Overton, which would have been the third of February with the School System. That was BEFORE the Blade article came out on this. Then Amstutz said that portion didn’t require a resolution from Council on since that would necessitate an agreement from Health Care REIT with TPS.

Councilman Joe McNamara asked clarification that the tax credits only related to the new jobs rather than the existing jobs, Amstutz went through a very lengthy explanation but the basic jist was yes, it was only for the new jobs. McNamara then asked for clarification on the previous statement as to the corporation not being able to take the credit if they did not have a large enough corporate tax, Amstutz stated that was accurate, that it may not be in the ordinance before Council but it was on the agreement.

Councilman D. Michael Collins Collins said he did not see anything in the ordinances that defined what Amstutz stated, especially related to the benchmarks that must be met. Collins wanted more information on the benchmarks, what happens if it only gets to 30, what happens if it only gets to 20? Amstutz said under the municipal job tax creation, they must maintain the base of 68 employees and as they add new employees, the new income tax generated from the new employees will go up as they add new employees; they are entitled to 40% of the new, if they fall short, the city could adjust the amount of the credit, and under the Toledo expansion award since it’s a cash award, they would reduce the amount of the reward, they must have the 68 plus the 8 in the first year and the ten years, they could reduce or if they are not close at all, not give them the award. (I’m always bothered by the “we could” rather than “we would” that means that they could still get the full amount even if they didn’t meet the benchmarks.)

Collins also asked about this being transferred, Amstutz said that it could be transferred. Council President Sobczak said they’d like to move this forward as soon as possible and that he talked to School Board President Steve Steel, yesterday (that would be Monday the 9th) they are working out last minute understandings and would meet again on Thursday (today). Amstutz said they have an obligation to the schools given they relay on the tax base and said that was why his exact quote was, “Fortunately they have been foresighted enough to pass a resolution that says if you come to us with a project that is willing to do this, it’s pre-approved.”

This statement of course creates a number of questions…if we get beyond the two board members I spoke with not knowing this had been done for this project, not receiving any information on it after the City met with Dan Romano, why would TPS automatically give this without any discussion or sharing of information with School Board members? How could an agreement be worked out with TPS and REIT without board members even being told about it?

Amstutz said if the amount had been 50% as an example then the City would have had to have gone before the School Board but since it was at 67% they didn’t have to do that. Amstutz said TPS had not expressed any concerns and had talked to Steel and he said this was within their “standard agreement.” There was no mention of the County tax dollars…so I’m not sure as to that aspect.

The city is trying to sell the Secor Armory again, this will be the third time it’s been placed up for sale. Each time before it’s failed for one reason or another, the proposed sale price is $65,000 to Valencia Holdings, owned by Wahid Sediqe, they are local real estate investors who own quite a few properties in the community. Amstutz said he looked at other properties they own and that they were well taken care of well maintained, he felt these folks are here for the long haul. He also spoke with other people to “see what kind of a reputation these folks have.” In checking Areis, there are no properties owned by “Valencia Holdings” there are properties owned by “Valencia Consultants” but that is an entirely different company according to the Secretary of State business filing information. Wahid Sediqe is listed under Valencia Holdings, Sediqe 3361LLC and Sediqe Acquisition, LLC. Valencia Holdings was just created in the summer of 2008.

The sale price is basically what the City paid for it back in 2001, part of the property originally included in the sale to the City was split off into two parcels, so the acreage sold is less than what it was when the City bought it. The property is zoned residential, and a zoning change would have to happen for Valencia to go forward with the project – the two contingencies are the zoning change has to be done before closing and the City maintains the right to review their plans prior to the closing. There will be asbestos in the building $15 to $22,000 for the asbestos remediation, demolition is $178,000 for the building and there are several out buildings some that have no roofs that will also need to be torn down. Amstutz said he was appalled at how the property looked, it was overgrown, buildings that absolutely need to come down, we need to get the property in the hands of someone who can do what needs to be done, bless them if they can figure out how to use the existing building, his prediction is that they will have to demolish the building and go for new construction. McNamara asked where the money from the sale would go, he was told the money would go into the General Fund. Councilman Tom Waniewski said the armory building is in bad condition inside as well, he asked if the City did an appraisal on the property. Amstutz said no, we don’t have a lot of money for professional studies, services, appraisals, etc. They looked at the offer and felt it was fair.

There was quite a bit of discussion on the $15,000 dollars to be used for an economic development study, considering at times how little discussion there is on million dollar projects, it’s always interesting to see this much concentration on $15,000. The basic jist is there is grant money that this area can apply for but part of the application process is there has to be an economic impact study as a part of it. Almost half of the agenda review was in reference to this one item. For those of you wanting more details, Richard Martenko stated the value of the study is $35,000 and will use databases from the University of Tennessee rather than having the University of Toledo to buy them. It’s predicted 50 to 100 new development taking place, upwards of 25 to 30 million dollars of new development and wages in the neighborhood of $18.00 an hour and then there are ten dollar an hour indirect jobs that was stated happen on a one to one ratio. It’s not uncommon for projects like this to create up to 500 new jobs.

That was the main items that created discussion before Council that will be on the Agenda for the next week’s Toledo City Council Meeting.