Dayton Daily News (Ohio)
BYLINE: By Lawrence Budd
Area cities have agreed in the past two years to pay $2.9 million to 33 businesses promising to retain or create more than 2,500 jobs, according to a survey conducted by the Dayton Daily News.
The funds are paid out as grants if the companies meet job and payroll targets, city officials said.
In the past two years, the city of Dayton’s economic development loan program has agreed to pay about $2.3 million to businesses pledging to keep or bring more than 2,135 jobs. Similar programs in Kettering, Miamis-burg, Moraine and Springboro reported committing to $650,000 to 14 companies for 525 jobs.
While programs varied, each city surveyed by the Dayton Daily News indicated it offered “forgivable loans,” typically as an incentive for companies interested in expanding or relocating in the community. The loans essentially function as grants if companies keep their expansion, jobs or relocation promises.
In most cases, officials said the companies meet job or payroll goals in agreements more than offsetting the loan amounts. This releases the companies from having to pay back the loans and bolsters city coffers.
Occasionally, the companies default, forcing the cities to try to “claw back” the public funds paid to the companies.
“Economic development is a bit of a gamble in a lot of cases,” said Timothy Downs, deputy director of economic development for Dayton.
Tightening the rules
Dayton is updating its forgivable loan programs to tighten up clawback provisions in agreements.
In 2010, the city lost $200,000 paid through a forgivable loan to Ultracell, a California-based fuel-cell maker, after the company abandoned expansion plans here, Downs said.
Under the new rules, the city also will make annual checks of payments for income tax withheld on behalf of employees.
“They might have a bad year. We’re trying to make sure they are growing,” Downs said. “It let’s them know we’re serious about it.”
Still rather than legal action, the city likely is to pursue repayment in discussions with the companies, Downs said.
In 2010, Dayton agreed to a $107,000 forgivable loan with B4C, a composites company on McCall Street planning a $1.8 million expansion. A new production line was to create 16 jobs. Last year, the company repaid $4,991.69 after failing to meet employment goals, records showed. The city still is pursuing repayment for 2011, Downs said.
In another deal, Dayton and Cintas negotiated a settlement after the company failed to meet jobs tied to a $125,000 loan.
“We want to be supportive of the business. We have to be primarily responsible for the tax dollars that are in play. It’s a balancing act,” Downs said.
Dayton also made forgivable loans to the Patterson Square residential development and Mary Scott Nursing Home. Charles Simms Development is to receive $400,000 upon construction and sale of 15 to 18 town homes. The nursing home received $100,000, half after topping $250,000 in fundraising.
Springboro has refilled two empty commercial buildings with companies provided forgivable loans in the past two years. In Springboro and the other cities surveyed, the agreements usually span five years.
Thaler Machine was to be paid $50,000 from Springboro in exchange for maintaining a 69-worker payroll. The Tooling Zone was to get $12,000 based on expectations the company would employ 33 workers.
So far, all of Springboro’s forgivable loan recipients have met job targets, Assistant City Manager Chris Pozzuto said.
Copyright 2012 Dayton Newspapers, Inc.