Ohios Incentive Programs

1
Ohios Incentive Programs

• Steve Schoeny
• Director
• Strategic Business Investment Division
• Ohio Department of Development

2
Agenda and Topics

• The Core Four State Incentives
• Rapid Outreach Grants
• Job Creation Tax Credit
• Ohio Investment in Training Program
• 166 Direct Loan
• The Core Four Local Incentives
• Enterprise Zones
• Community Reinvestment Areas
• Municipal Income Tax Credit
• Tax Increment Financing
• New Credits

3
Key Principles

• In economic development, we are all CAT people
• CFT and PPT were a dogs
• Cash is King. Kings make rules.
• Rule 1 Dont abate your base
• Rule 2 If the deal is foundational to your
  community, ignore Rule 1
• Rule 3 KISS
• Rule 4 Apply Rule 2 to Rule 3

4
Rapid Outreach (fka 412)

• Grant funding program
• Recipients are companies or community/government
  entities
• New job creation preferred, but job retention
  projects are also possible
• Controlling Board has final approval
• Clawback provisions apply for non-compliance
• Funds to offset fixed-asset investment
• On- and off-site infrastructure
• Building acquisition and construction
• Machinery and equipment acquisition

5
Variations on Rapid Outreach

• Contingency
• JRS Discretionary
• Targeted Industry Attraction
• 629 (Roadwork Development)

6
Job Creation Tax Credit (Today)

• Net, new, full-time jobs at the project site
• 25 jobs or more (10 jobs if high wage)
• Performance based, significant reporting
• Relocation issues
• Local match
• Variation Job Retention Tax Credit

7
Job Creation Tax Credit (Proposed)

• Increase in payroll and full time equivalent
  (FTE) employees
• 25 jobs or more (10 jobs if high wage)
• Performance based, significant reporting
• Relocation notification requirement

8
Job Retention Tax Credit

• Nonrefundable tax credit against Commercial
  Activity, Personal Income and Corporate Franchise
  taxes
• Today
• 1000 Full-time employees, 100 million investment
  minimum
• Proposed
• 500 Full-time employees, 50 million investment
  for manufacturing and 20 million for
  non-manufacturing
• Adds Premiums and Dealers in Intangibles taxes

9
166 Direct Loan

• Direct financing to companies for fixed asset
  investment
• Job creation and/or retention requirements
• Rates Currently around 3 percent fixed
• Terms 7 to 10 years for ME 10 to 15 years for
  real estate
• Maximum amounts of 30 percent of project costs,
  or 1 million (subject to flexibility)
• Flexible repayment schedules

10
Variations on 166

• RD Investment Loan
• Innovation Ohio Loan
• Regional 166 Loan
• Bonds
• Ohio Enterprise Bond Fund

11
Ohio Investment in Training Program

• Company must demonstrate investment in facilities
  and/or equipment that would not otherwise be made
  in Ohio
• and/or the creation of jobs or retention of jobs
• Company must match dollar for dollar
• Company must pay the wages of the employee during
  training

12
Ohio Investment in Training Program

• Funding formula, including
• Projects paying less than 10.88/hr. (150 of the
  Fed. Wage Rates FWR) are not eligible
• Projects paying at or above 150 of the FWR may
  receive between 300 to 1,000 per job
• Variation Workforce Guarantee

13
The Core 4 Local Incentives

• Community Reinvestment Area
• Enterprise Zone
• Tax Increment Financing
• Municipal Income Tax Credit

14
Ohio Community Reinvestment Area Program (CRA)

• Ohio Community Reinvestment Area Program (CRA)
  permits local governments to grant exemptions
  from real property taxation for qualifying
  improvements made within a locally designated CRA
  area
• CRA area designation is based on determination
  that there is a lack of reinvestment in housing
• Improvements to residential, commercial,
  industrial, and retail properties are eligible
  for abatements
• Abatements are for 0-100 of property tax
  liability, but maximum term varies from 10 to 15
  years, depending on the type of improvements
  (new construction vs. renovation) and project
  type (single family, multi-family, commercial, or
  industrial)

15
Ohio Enterprise Zone Program

• Ohio Enterprise Zone Program (EZ) permits local
  governments to grant exemptions from real and
  personal property taxation for qualifying
  improvements made within a locally designated EZ
  area
• EZ area must meet one or more economic distress
  criteria
• Abatements are from 1-15 years and for 0-100 of
  property tax liability
• Improvements to residential, commercial, and
  industrial properties are eligible for abatements
• Retail is ineligible except in 27 Ohio cities
  certified by ODOD as impacted
• Programs expires October 15, 2009

16
Pre vs. Post 1994 CRA

• Pre 1994 - community creates area. Post 1994 -CRA
  confirms that created area meets statutory
  requirements.
• Pre 1994 No relocation limits.
• Pre 1994 C/I Incentives set by legislation on a
  program basis. Post 1994 - project specific
  agreement.
• Pre 1994 minimal role for school boards
• Pre 1994 no oversight of C/I tax incentives by
  local TIRC

17
Comparing CRA EZ

• Municipal income tax sharing required for all CRA
  or EZ projects with new employee payroll in
  excess of 1M.
• Renovation exemption can be up to 12 years in a
  CRA, but up to 15 years in EZ.
• CRA exemptions are processed through County
  Auditor while Ohio Tax Commissioner must approve
  EZ real estate tax exemptions.
• CRA can provide exemptions for retail businesses.

18
Tax Increment Financing (TIF)

• Ohio Tax Increment Financing (TIF) permits local
  governments to grant exemptions from real estate
  taxation for qualifying improvements made within
  a TIF project area or an incentive district
• Instead of receiving an abatement, property owner
  makes a payment-in-lieu-of-taxes (PILOT),
  equivalent to the taxes the owner would otherwise
  have been obligated to pay to the local
  government creating the TIF
• The PILOT is deposited in a service fund, the
  proceeds of which are used by the local
  government to provide services to the property
  (frequently the amortization of bonds financing
  public infrastructure serving the site)

19
Municipal Income Tax Credit

• ORC 718.15. A citymay grant a refundable or
  nonrefundable credit against its tax on income
  to a JCTC recipient. Credits shall be
  measured as a percentage of the new income tax
  revenue the city derives from new employeesand
  shall be for a term not exceeding fifteen years.
  The City and the company shall enter into an
  agreement specifying all the conditions of the
  credit.

20
Whats Next
21
Create a Transparent and Efficient Process

• Comprehensive evaluation reporting
• Incentive investments tax expenditures
  accounted for within a state-wide economic
  development program budget
• Simplify
• Eligibility requirements
• Application review procedures
• Reporting requirements
• Eliminate time delays rework associated with
• Project change-orders, grant loan agreement
  amendments
• Projects spanning multiple fiscal years biennia

22
Standardize Regulations Across Programs

• Property tax incentive simplification/standardizat
  ion
• Transparency
• Speed
• Efficiency
• Support for growth in place
• Portfolio approach

23
New Credits

• State New Markets Tax Credit
• Add on to the Federal credit
• Seeks to capture a higher proportion of NMTC
  funds for Ohio
• Film Tax Credit
• Will function much like a grant program

24
Contacts

• Steve Schoeny
• Director, Strategic Business Investment Division
• Ohio Department of Development
• Tel. [phone]
• Email steven.schoeny_at_development.ohio.gov