Monday, June 09, 2008

North Canton Proposes Corporate Welfare at Taxpayers' Expense

Prepared Comments Made to
June 9, 2008

On tonight’s agenda there is proposed legislation to appropriate $143,000 from the unappropriated balance of the North Canton CIC Escrow Fund to the North Canton CIC. It is to be voted on as Ordinance No. 61-08. The movement of these funds is an accelerated payment ahead of the payment schedule set forth three years ago in previous legislation. That legislation provided for annual payments of $100,000 to the North Canton CIC for fifteen years totaling $1.5 million dollars in taxpayer funds. These are funds that were paid in good faith by taxpayers to fund city operations.

Tonight’s proposed legislation will also put into jeopardy an initiative petition which is presently being circulated that seeks to allow voters the opportunity to choose whether to cease annual payments from the North Canton Escrow Fund and a return of the remaining balance of $1.1 million dollars to the General Fund. The City of North Canton was duly served notice of the initiative petition on May 28, 2008, when it was provided a certified copy of the proposed legislation.

Tonight’s proposed legislation is also corporate charity raised to a new high, even by North Canton standards.

At least week’s brief discussion on the benefits of bringing Myers Controlled Power Corporation to North Canton from the City of Massillon, the facts regarding employment levels and tax collections seemed to escalate each time someone spoke on the topic.

Former President Ronald Reagan followed a policy in his dealings with the Russians that many of you might remember – Trust but verify. Has anyone on this council bothered to verify the so-called facts regarding the benefits of paying $440,000 to assist in the relocation of Myers Controlled Power Corporation to North Canton?

Based on council’s discussion last week, it is clear that this body is running with what is termed in the finance world as “imperfect information.”

After providing many members of this council body with documents I have obtained from the City of Massillon, I hope to hear a more factual discussion tonight on the possible relocation of Myers Controlled Power Corporation to North Canton. And the discussion should be free of the hype and sales pitches I heard last week. This should not be a political decision that results in a sound byte or photo opportunity for politicians.

The documents show the following facts: Controlled Power Corporation relocated back to Massillon in 2000 from Canton Township to the very facility from where it began its operation in 1966. In a letter to the Mayor Massillon, dated January 18, 2000, Controlled Power Corporation asked for relocation assistance in the amount of $25,000 with the promise that Controlled Power would relocate its seventy employees to Massillon and increase employment to over 100 people by early 2001.

These are the very same 100 jobs that North Canton now proposes to pay $440,000 for. Apparently, Myers Controlled Power believes they have found the yellow brick road leading to North Canton and that the Wizard of Oz will grant them their wish.

I hope that this council and the trustees of the CIC realize how financially unsound this proposal is. It is amazing that this plan of action has even been seriously discussed publicly. If anyone does not think this proposal for corporate welfare is financially unwise then I would suggest that before further consideration of this proposal they make the same request of the Wizard of Oz that the Scarecrow made.

Along with the relocation assistance of $25,000, the City of Massillon abated personal property taxes on equipment which, I am told, amounted to approximately $21,000 per year. Given that personal property taxes for business are being phased out by the state of Ohio and end in 2008. Apparently, Myers has no financial incentive to remain in Massillon.

Controlled Power Corporation met promised employment levels for the first four years of the ten-year abatement period. In 2005, Controlled Power Corporation was purchased by Myers Power Products and employment was slashed to 58 people where it remained for two years. In an October 9, 2007, letter, Massillon’s Community Development Director advised Myers that the Tax Incentive Review Committee recommended to Massillon City Council that Myers Controlled Power be placed on probation for failing to meet the promised level of 100 jobs. Presently, Meyers remains on probation.

Statements were made at last week’s council meeting that first year income tax collection for the City of North Canton from Myers, based on current payrolls, would be around $93,000 annually. Someone else stated income tax collection would top $100,000 the first year and $139,000 in the second year. Does anyone know factually? Shouldn’t there be a minimum dollar amount of income tax collections that are guaranteed regardless of employment fluctuations? Or is this simply a promise that if not kept North Canton will simply slap their wrist and put them on probation as is the norm when companies do not keep their promises for corporate welfare?

Income tax collections in the City of Massillon, with an income tax rate of 1.8%, from Myers totaled approximately $56,000 in 2007, and lower still in the two previous years. This is a far cry from the promised $100,000 and more that has been suggested in presentations before this body. With North Canton’s lower tax rate of 1.5%, will North Canton truly collect the levels of income tax we are being told in this sales pitch to try to justify doing this deal? Does anybody know for sure?

Wasn’t the North Canton CIC supposed to operate on a revolving loan basis? How can the city’s economic development continue if the CIC does not recoup loaned funds? I remember the sales pitch three years ago when the idea of using $1.5 million of taxpayer funds to fund the CIC was discussed. We were all told that the taxpayer-funded CIC will work as a revolving loan fund allowing the CIC to be self-supporting? Giving the funds away and owning landlocked property with little or no value and owning used crane equipment installed at great expense in a private facility is not recouping funds needed to help the next business.

How is North Canton going to lure the next company to the city if you proceed with this extravagant example of corporate welfare? The next company is going to expect equal or better treatment. They will follow the yellow brick road to North Canton because they know there is a pot of gold waiting for them. And if the Wizard of Oz refuses their request, they will not care whether the City of North Canton will be a good fit for their company. For these companies, you will have poisoned the well when you refuse their request, either because you have exhausted your limited supply of funds or you realize that you are giving away the farm, and your efforts to attract more companies will be much harder.

If this proposal gets the green light, communities across the county and the state will wonder what possessed the leaders of North Canton to pay $440,000 for the guarantee of the same 100 jobs for which Massillon paid $25,000. People can only come to one of two conclusions: sheer desperation or sheer ignorance.

I urge fiscal responsibility and common sense. To give hundreds of thousands of dollars to a business and also before the year is out cut city services will result in a great deal of citizen discontent and ultimately harm to the City of North Canton.

Thank you,
Chuck Osborne
City of North Canton