Monday, June 25, 2007

North Canton Tax Dollars Benefit Private Business for the Second Time

Prepared Comments Made to
June 25, 2007

Two weeks ago on June 11, 2007, I questioned before this council the decision of the North Canton CIC to purchase a ½ acre property abutting the rear parking lot of Abbott’s Bridal Shop for additional parking needs to benefit private business. The need for expanded parking at the rear of Abbott’s is the only hurdle to the property owner for leasing 11,000 sq, ft. of office space to the Service and Support Administration of the Stark County Board of MRDD and bringing 70 jobs to the city.

The four-year lease, with an on option to renew for one year will generate $428,450 for Mr. Randall McNurlin. In Mr. McNurlin’s own words before the CIC, this was net revenue. The CIC will be expending $115,000, not including engineering and other soft costs, for the purchase and development of the ½ acre parking lot. These are funds that were removed from North Canton’s General fund and given to the CIC. The CIC will recoup from Mr. McNurlin $1.00 per year over the five-year span of the lease and be left owning a landlocked parking lot with no value at the end of the lease.

This handout of what was once taxpayer dollars to benefit the private business interests of Mr. McNurlin is not the first time the owner of Abbott’s Bridal Shop has benefited from taxpayer assistance.

I call it a part of the city’s genealogical history. Paul Harvey would call it “The Rest of the Story.”

I have learned the following from a search of city records: In 1998, the City of North Canton purchased the property on which Abbott’s Bridal Shop is now located for $180,000 and paid $9,600 to clear several structures from the property. These figures do not include appraisal costs, survey costs and other soft costs required in the purchase of the property. The property consisted of 1.51 acres. The city subsequently sold 1.26 acres to Mr. McNurlin and carried a no-interest note on the sale of the property for him.

The North Canton City Council passed the legislation to sell the property on “an emergency” on December 14, 1998. In city council minutes from the meeting Council member Jon Snyder is quoted as saying “…it’s a win, win situation for the city. And my compliments to Mr. Sumser for putting it together.”

After months of delays on the part of Mr. McNurlin to finalize the purchase of the property, the following comment were made by council members in a council meeting held on May 10, 1999. Council member Tim Morrow stated “…We have—you know there’s a valuable piece of Main Street property…we spent taxpayer dollars to tear this down…."

Mr. McNurlin subsequently finalized the purchase of the property on July 14, 1999.

After Mr. McNurlin received a “moving credit” of $65,000 from the city for business moving expenses, his net cost for the purchase of the property was $50,000. Mr. McNurlin became owner of a “valuable piece of main Street property” for a fraction of its true costs at the expense of North Canton taxpayers.

At the May 10, 1999, council meeting, Council member Doug Foltz is quoted as saying “…It’s a sweetheart deal for him….” The vote by council, “on an emergency,” to sell the property to Mr. McNurlin was unanimous. Is that any surprise?

Yes, Mr. Foltz, it indeed was a sweetheart deal.

How many other business owners would like to acquire frontage on Main Street for a fraction of its costs?

The city used the rear portion of the property, approximately ¼ of an acre, to locate a water storage tank that water distribution studies have identified as a less than an ideal location for a water storage tank.

The poor location for this South Main Street Water Storage tank is due to low ground elevations that have been acknowledged only recently by this administration. I thank Mr. Wise for his candor in this regard as past city administrations have denied there are problems.

As we all know from grade school, water does not flow uphill. Why city council approved this location for construction of a water storage tank does not speak well for their grasp of basic principles of physics. The construction of the water storage tank at this location received unanimous approval from City Council.

The owner of Abbott’s also received waivers for sewer frontage fees and water tap-in fees totaling $5,021.00. Additional zoning variances were given including reduced parking size requirements.

In 1999, the City of North Canton gave Mr. McNurlin a five-year, fifty percent abatement of taxes on the Abbott Bridal Shop property. Unfortunately, the city was not able to provide any documentation as to the amount of taxes that were abated. From the outset, it appears from the records that Mr. McNurlin failed to comply with the terms of the original five-year tax abatement. That abatement was amended to a three-year, fifty percent abatement of taxes. I was unable to determine whether the terms of the amended tax abatement were ever met as well, but as we have seen from ongoing tax abatements, the tax exemption continues whether there is compliance with the terms of the agreement or not.

It is interesting to note that the city also could not provide any kind of estimate in terms of income taxes that have been collected from business activity from this property yet the city was quick to provide estimates of the income tax that would be collected if MRDD relocated to the office space located below Abbott’s Bridal Shop.

In summary, the assistance to the owner of Abbott’s Bridal Shop has ranged from “sweetheart” deals to outright giveaways at taxpayer expense. These actions, past and present, are a blatant slap in the face for North Canton taxpayers who are subsidizing financial gain for private interests. Furthermore, other business interests throughout the city do not receive the same corporate charity that has been lavishly showered on Mr. Randall McNurlin.

At 1280 South Main Street, the business owner has received the following: deep discounts for purchase of Main Street property, waivers of fees, no interest loans at taxpayer expense, exemption of property taxes on commercial property despite noncompliance with terms of the agreements, free use of property and property improvements at the expense of others. All of these giveaways are at taxpayer expense and create unfair advantage between businesses that operate without handouts. None of this speaks well of city leaders who promote the city in this manner.

It is a sad thing to watch the abuse of public monies in this manner.

This is North Canton’s past practice and it continues today. Something is wrong!!

Thank you,
Chuck Osborne
City of North Canton

Monday, June 11, 2007

North Canton CIC Provides Illusion of Great Benefits

Prepared Comments Made to
June 11, 2007

The trumpeted arrival of the Service and Support Administration of the Stark County Board of MRDD and its promised seventy jobs is not a windfall for the City of North Canton. All one has to do is simply crunch the numbers as supplied by North Canton Economic Development Director Eric Bowles in his presentation to the CIC Board of Trustees last Tuesday, June 5, 2007.

I should have known that this was a done deal as the prospect of MRDD moving its offices to the City of North Canton had already been announced on WHBC radio days before this CIC meeting.

At last weeks CIC meeting, the CIC Board of Trustees agreed to purchase ½ acre of property from McKinley Development, the owner of property abutting Abbott’s Bridal Shop on the north for $75,000. Mr. Lemmon, the owner of McKinley Development, stated to the CIC Board that the property is valued at $150,000 per acre. The valuation of the property was questioned in the meeting by a trustee.

Why was their no independent appraisal on the valuation of the property? Most attorneys would be on safe ground in suggesting an independent appraisal of real estate before making an offer to purchase.
The city’s Law Director who was in attendance at this meeting made no such suggestion.

While I watched the owner of Abbott’s Bridal Shop, Mr. Randall McNurlin, present his request for assistance to the CIC Board of Trustees, the obvious question to me was why didn’t the owner of Abbott’s Bridal Shop sit down and work out a business deal with Mr. Bill Lemmon, owner of McKinley Development? The property that the CIC will own is landlocked and is of no value to anyone except Bill Lemmon, and, for the moment, Randall McNurlin, who is in need of additional parking to accommodate the prospective tenant noted above.

The proposed development project that was presented to the CIC Board of Trustees was for the CIC to purchase the McKinley Development property for $75,000 and make improvements to the property (clear trees, install drainage and fill, and pave with asphalt) to create additional parking for the building containing Abbott’s Bridal Shop. The cost to the CIC was said to be an estimated $115,000, excluding engineering and other soft costs.

Given that development costs of the property are only estimates and that they do not include engineering and other soft costs, the final costs to the CIC could reasonably total $130,000.

The owner of Abbott’s Bridal Shop will have use of this parking lot for $1.00 per year for the entire term of the lease with no obligation to repay the CIC its costs.

In the initial four-year term of the lease, Mr. McNurlin told the CIC Board that he will receive net revenue of $7.79 per sq. ft. on his 11,000 sq. ft. of office space. This equates to $342,760 over four years.

The City of North Canton is expecting on average for 70 jobs, $34,500 per year in income taxes for a total of $138,000 over the four-year life of the lease with MRDD. The seventy jobs are only promised, not guaranteed.

To calculate the true benefits of this deal, the benefit of the CIC leaving the $130,000 in the bank must be factored into the financial analysis. In this case, if the CIC simply left the $130,000 in the bank for four-years, simple interest alone would increase these funds to $156,000.

Does it make economic sense for the CIC to expend or forgo $156,000 to generate $138,000 over a four-year period?

In addition to the above financial analysis, there is the added risk at the end of the four-year lease, when the owner of Abbott’s Bridal Shop may no longer need the added parking, that the CIC will own a non-marketable landlocked ½ acre parking lot and lose its entire investment in the property.

The bottom line is that the CIC will be out $156,000. This proposed development on behalf of the owner of Abbott’s not only fails to recoup the original costs borne by the CIC, but leaves the CIC owning a real estate asset with no resale value.

Apart from the financial aspect of this giveaway of former taxpayer funds, there are the limitations of the property itself. This property was never designed to accommodate this volume and density of traffic into and out of the property. It will be a horrendous traffic nightmare and compromises safety in every way.

The monies being used in this giveaway were removed from North Canton’s General Fund just two years ago by City Council.

Now these former tax dollars are being handed out, with no demand for repayment, to benefit private business and with no real benefit to the taxpayers of North Canton.

Former Mayor Tom Rice, a trustee on the CIC Board stated that he could not be Santa Claus and was the only trustee on the CIC board to vote NO on the request for financial assistance.

People with clearer minds need to rethink this deal.

We all know this is an election year and we all know that politicians want to provide the illusion that under their leadership positive things are happening in North Canton but at what price?

This is all smoke and mirrors under the guise of jobs for the city with politics thrown in to spin a giveaway of tax dollars into an illusion of progress.

As the old proverb says, “You cannot make a silk purse out of a sow’s ear.”

Financially and economically, there is no gain to the city. This deal simply enriches private business at the expense of the public and creates safety issues and traffic headaches that the public will have to bear.

Thank you,
Chuck Osborne
City of North Canton