Report: Abatements creating good jobs
By Kevin Kelley
Westlake
Published March 26, 2008

Through the end of 2007, tax abatement agreements made with Westlake businesses over nine years have created 746 jobs, according to a city report. An additional 367 jobs were retained as the result of the tax incentive agreements, the report said.

The report was created by the city’s Economic Development Department in preparation for the annual meeting of the Westlake Tax Incentive Review Council held March 19 at City Hall. The council, which is an advisory body only, reviewed the tax abatement agreements the city has with nine companies.

The council took two votes on each agreement — first, whether each company is compliant with its part of the agreement and then whether the agreement should be continued.

The council, which was chaired by Joseph Micciulla of the Cuyahoga County Auditor’s Office, consists of Mayor Dennis Clough, City Council President Michael Killeen, Ward 5 Councilman Ken Brady, Ward 2 Councilman James Connole, Finance Director Anne Fritz and Westlake Board of Education Vice President Tim Sullivan.

Westlake City Council has the final decision on whether an agreement should be terminated.

Westlake Economic Development Director Bob Parry, who reported to the committee on each agreement, said the number of jobs created thanks to the agreements rose substantially over the past year, thanks primarily to hirings at Hyland Software and Q Panel Lab Products.

The increased payroll from new jobs was $58.9 million in 2007, up from $35.2 million in 2006, the report said.

The abatement agreements with the nine companies lead to a net gain of $620,427 in property taxes and income sharing payments paid to the Westlake City Schools, Parry said.

The city saw a gain in income tax of $114,734 in 2007 thanks to abatements, but these were offset by sharing of income tax with the school district totaling $124,158.

The council found all nine companies in compliance for 2007 with their original agreements and recommended that the abatements continue.

Companies have five years to meet the requirements of the agreement. Parry said Struers Inc., a manufacturer of measuring and controlling devices, was in the third year of a tax abatement deal but did not look like it would be compliant as the number of retained and new jobs at the company was below what it had promised.

The review council recommended continuing the abatement subject to adjustments and discussions with the company, which recently added new management.

Another company, Sweet Pea Properties, formerly Controlco Inc., had fallen out of compliance in 2005. As a result, City Council suspended its abatement. The review council found that the company returned to compliance in 2006 and 2007 and recommending restoring the abatement for those years.

Abatements are only offered on new development on industrial or office buildings located in the city’s community reinvestment area and enterprise zone.

“Some of these (companies), they could have gone elsewhere,” Parry said. “There’s a lot of competition to go to other cities or outside the area.”

The city fought tax abatement for many years, Clough said, but had to offer it when other cities did.

“We’re very pleased with the investment that continues to be made in the city of Westlake,” Clough said at the March 19 meeting.

Westlake added tax abatement in the mid-1990s, Parry said. The first company to  receive abatement was Viking Sewing Machines, which relocated from Lakewood. The company became the first tenant of the city’s industrial district, Parry added.

“We had been hit pretty badly with companies going out of the county and out of Westlake being lured by abatement, so we had to create (incentives) to be competitive and to provide and incentive for businesses to stay in Westlake and expand,” Parry said.

The city also held off on abatement until the state law changed allowing cities to negotiate separate agreements with individual companies, Parry said.

No abatements are offered on land, income tax or corporate tax.

The typical agreement offers 50 percent abatement of real property taxes over a ten-year period, Parry said. For companies in the community reinvestment area, the abatement can be 100 percent on real property taxes for up to 15 years, he said.

In abatement cases where a new employer has a payroll above $1 million, the city shares 50 percent of its income tax with the school district until the foregone property taxes are matched, Parry said. In all abatement cases, the district is guaranteed 50 percent of all property taxes it would have received if there was no abatement agreement, Parry said.

“The city and schools both win,” Parry said. “We’ve been able to keep some growing businesses and industry in Westlake.”