Mayor Jack Ford and Councilman Wade Kapszukiewicz announced a cash-for-jobs program yesterday in an attempt to reward companies that locate in the heart of the city.
Nonretail companies that create or retain jobs would be eligible for a check equal to one-third of the city payroll taxes that the company would generate.
At most, a company could receive $75,000 annually for 10 years.
The mayor would have the final say over which companies would get the checks. In proposing the incentive, city leaders are hoping to gain new workers, even if they have to accept lower payroll taxes to do it.
“We're just trying to increase our critical mass in the downtown area,” Mr. Ford said. “This is just one thing we're going to do. The housing that's going on will have a certain impact; some of the arts things we're doing have an impact. So there's a variety of strategies going on, although this isn't a magic bullet.”
The proposal calls for companies to benefit for a set number of years based on the number of jobs created or saved. It would affect an area roughly bounded by the Maumee River and Lafayette, Cherry, and 14th streets.
For example, the creation of five jobs, the minimum required to participate, could prompt payouts for up to two years. The creation of 76 or more jobs could generate a benefit that would last up to 10 years - the maximum allowed.
The city will monitor each company to ensure they create or retain the jobs promised.
The ordinance will be introduced to City Council next week. A hearing will be held July 24 in front of council's economic development committee, which Mr. Kapszukiewicz chairs.
Mr. Kapszukiewicz said it has not been determined how much tax revenue the plan could cost the city because it's difficult to predict how many businesses will take advantage of the program. The councilman said he expects a rough figure to emerge as the issue is discussed in front of City Council during the next month.
The hope, he said, is that the program would generate more revenue - by the creation or retention of jobs - than would be lost by payouts.
He said he generally opposes incentives for companies, but when so many other cities and states are offering them, it's difficult to be the lone holdout.
“I don't like it, but given the fact that the leadership in Washington and Columbus hasn't solved this problem for us, we need to be able to compete - we need to be able to survive,” Mr. Kapszukiewicz said. “We don't want to see our city decline just because we were too honorable to play the game everyone else is playing.”
The overall vacancy rate in downtown Toledo is 28 percent, while the rate for newer, more attractive space is 17.5 percent, according to Marty Gallagher, a partner at Michael Realty.
Mr. Gallagher said some companies move to places such as Arrowhead Park in Maumee for logistical reasons that do not have to do with incentives or abatements, but the Toledo proposal might make it easier to keep businesses downtown.
“I think it will help,” he said. “To what extent? Time will tell. I can't imagine someone not taking advantage of that if it were available. I think that's pretty good news for downtown Toledo.”
Maumee adopted a cash-for-jobs program in 1992 because it did not meet the state requirements to offer tax abatement and other incentives. Under the program, a company can get up to $20,000 a year for up to 10 years depending on the number of employees and the size of its payroll.
The “grants” are paid from Maumee's general fund, from nontax sources such as fees and interest.
Toledo has lost tens of thousands of workers to suburban office parks such as Arrowhead over the last two decades. Steve Herwat, head of the Toledo-Lucas County plan commissions, said there are 18,000 to 20,000 office workers in Arrowhead and 12,000 to 15,000 in downtown Toledo.
Councilman Peter Gerken would like to stem the tide of businesses leaving downtown Toledo, but he is wary of the proposed incentive.
He said it is important to try to decrease the vacancy rate in downtown office buildings, but he is concerned that the lost tax revenue won't be recouped. He said he needs more time to examine the details of the proposal before he decides whether to support it.
Mr. Gerken was critical of the Finkbeiner administration for not taking away tax incentives from companies that did not live up to employment projections. He said he does not want to see that practice continue under Mr. Ford.
“The monitoring side has to be strong. The enforcement side has to be strong. The political will to rescind agreements that aren't being adhered to on the company side has to be swift,” Mr. Gerken said.
Councilman Gene Zmuda said he supports the idea because it might help downtown landlords retain commercial tenants.
“This proposal appears to assist in leveling the playing field so that those businesses that would otherwise go out in the suburbs may very well chose to remain here or to attract businesses that otherwise may not have considered downtown Toledo,” Mr. Zmuda said.
Steven Seaton, the city's economic development director, said the plan puts Toledo on more equal footing with neighboring communities that lure businesses away with their own incentive packages.
“I'm delighted we have this tool in our arsenal,” he said. “We really need to have incentives to keep businesses here and attract new businesses downtown.”