TENTATIVE AGREEMENT
City of Toledo, Owens Corning reach deal to keep firm until 2030
Incentive package given to downtown company
10/19/2013The Bell administration and Owens Corning have reached a tentative agreement on an incentive package to keep the company and its 1,250 jobs in downtown Toledo until at least 2030, averting a possible withdrawal of the firm when the current lease on its headquarters expires in 2015.
Both city and company officials confirmed the deal on Friday but could not offer estimates of the incentive package’s value. Additionally, Owens Corning — the only Fortune 500 firm still based within Toledo’s borders — is still negotiating with the Toledo-Lucas County Port Authority, which owns the building where the company operates.
Mayor Mike Bell said the deal was good for the city.
“I think what we are doing is exactly like all other cities are doing to leverage economic development,” Mayor Bell said. “[Owens Corning] is something we, as a city, could not afford to lose. ... They can move anywhere in the world, and they have means to move anywhere in the world, so we would not take anything they say lightly.”
Included in the deal with the city is extension of an existing tax-increment financing structure for an additional eight years. The current financing structure with the city expires in 2016. The amended TIF will expire in 2024, said city spokesman Jen Sorgenfrei.
That tax-increment financing structure was crucial to the initial financing of the building 20 years ago, she said.
The extension includes provisions for Owens Corning, a building materials manufacturer, to make payments in lieu of taxes to Toledo Public Schools in future years.
“Starting in 2018, the school system will get $450,000 a year,” said OC spokesman Brian McPeak. TPS gets nothing from Owens Corning now.
Also under the deal, Owens Corning also will get the land where its headquarters sits, contingent upon the company remaining at the site for 15 additional years until 2030.
Under the original incentive package for the building — which kept OC from moving out of Toledo altogether two decades ago when it left its former site at the Fiberglas Tower — it would get that land in 2075, Mr. McPeak said.
The city also must repave Owens Corning Parkway, the public street in front of the building, in 2015 with funding help from the state.
Mr. McPeak said the company has agreed to add 50 jobs downtown within three years.
“There were additional tax obligations that would occur to us once the incremental TIF expires, so as we looked at those we began to examine what is the cost of remaining and our other options,” Mr. McPeak said. “We always wanted to remain here. … We reopened up discussions to say, ‘What could we do together to renew our commitment?’ ”
Paul Toth, the port authority’s president and chief executive, said OC first approached the port authority about the lease about three or four months ago, possibly so that any debt refinancing undertaken now would take advantage of low interest rates.
“They simply said they were looking at all of their options, including relocating somewhere else,” Mr. Toth said.
Mr. McPeak said Owens Corning was never “actively shopping” for another location.
OC Spokesman Matt Schroeder said the company negotiated with the city, the port authority, and the Toledo Public Schools.
“From the beginning of that process, the three entities sat down and began to work on an agreement to keep Owens Corning in Toledo,” Mr. Schroeder said.
Mr. Toth said Owens Corning’s lease on the building expires on May 15, 2015, but there are renewal options that so far have not been executed.
A key issue, he said, is $6.5 million in port authority bonds and state funds that now have to be paid off at the end of the lease or the “tail.” That is very similar to how the Burlington Air Express cargo hub at Toledo Express Airport was financed, he said.
“They have talked to us,” Mr. Toth said Friday evening. “We've given them a proposal to refinance the ‘tail.’ We have not heard back from them.”
The port authority’s board of directors Thursday will consider authorizing issuance of up to $8 million in taxable revenue bonds to refinance the tail. Nobody would be committed to anything, but the port authority would have the ability to move forward with new bonds if Owens Corning accepts the offer.
Toledo’s deal with the company still needs city council approval.
Rob Ludeman, chairman of council’s economic development committee, said he had not seen the entire deal and plans to hold a hearing about it Thursday.
Councilman D. Michael Collins, who is challenging Mayor Bell at the polls next month, said the deal is good for the city.
“I think Owens Corning is good for Toledo,” Mr. Collins said. “It went through serious financial challenges and to get the news that they will stay in Toledo for another 15 years is incredible.”
In 1994, Owens Corning received a $90 million package in exchange for staying in Toledo with its 1,200 jobs. About two-thirds of that deal took the form of a loan. The new building on the Middlegrounds was a shot-in-the arm for the Warehouse District. Several bars and restaurants stirred to life, followed by plans for a Toledo Med Hens stadium several blocks away.
In 2003, the company again got help from the public in exchange for staying downtown.
The company, which was in Chapter 11 bankruptcy at the time because of losses related to asbestos litigation, needed all of the insurance companies and others holding $55 million in bonds to agree to accept repayment of about 60 cents on each dollar owed.
The port authority, which arranged original financing for the 400,000-square-foot, $100 million waterfront building, agreed in 2003 to forgo about $18 million in lease payments and fees. In all, Owens Corning saved about $65 million under that agreement in 2003.
When BAX Global, the former Burlington, closed the Toledo Express hub two years ago, the port authority still held a $9.8 million “tail” of bonded construction debt from the $30.9 million it borrowed to build the facility. The port authority has until 2032 to pay off that debt and since has eased the facility to a new trucking-based cargo business, BX Solutions.
Owens Corning will celebrate its 75th anniversary Oct. 31. It reported profits of $22 million in first quarter of 2013 and $49 million in profits in the second quarter of 2013.
Last year, the company reported a loss of $19 million.
Staff writer David Patch contributed to this report.
Contact Ignazio Messina at: imessina@theblade.com or 419-724-6171 or on Twitter @IgnazioMessina.