City Says Chill-Can in Default of Tax Break, $1.5M Grant Agreements
YOUNGSTOWN, Ohio – The city has placed the developer of the Chill-Can project on notice that it might have to repay $1.5 million in grant funding, lose its tax incentives, and face potential litigation for defaulting on lucrative development agreements negotiated nearly four years ago.
The push comes after years of back-and-forth negotiations – and unmet job-creation promises — by the M.J. Joseph Development Corp. and its CEO, Mitchell Joseph. “It’s time to produce,” said Mayor Jamael Tito Brown at a 12:30 p.m. press conference.
“I continue to hear the same story time and time again [from Joseph] and the citizens and the voters deserve to see action and that’s why we’ve taken action,” he said.
Joseph, who was born in Youngstown, proclaimed in 2016 that he would build a $20 million research and manufacturing campus on the city’s east side that would be dedicated to producing the world’s first self-chilling can. The project was expected to bring more than 200 jobs to a distressed section of the city.
Joseph has since reneged on these promises, missed construction deadlines, failed to add the projected jobs, and has failed to abide by the terms of two development agreements signed in 2017, the city says.
Under one agreement, the city awarded the developer $1.5 million in grant money through its wastewater fund that was used to demolish a neighborhood and prepare land on the city’s east side for the new development.
A second enterprise zone agreement provided a generous 75% abatement on real estate taxes over a 10-year period. The city also spent an additional $400,000 to purchase and demolish a patchwork of occupied homes, and relocate residents of the neighborhood to other dwellings.
In return for these incentives, Joseph pledged to construct a warehouse, bottling facility and a plastics facility by Oct. 1, 2017 and bring at least 237 new jobs to a depressed section of the city.
According to the enterprise zone agreement, Joseph was to create 50 jobs during the first two years, 100 new full-time jobs during years three and four, and another 87 jobs during year five. The job creation period began on Nov. 1, 2017, documents state.
However, the jobs have not materialized since the developer broke ground on the complex in November 2016. Three buildings, the last of which was constructed during the fall of 2020, sit unused at the site.
The city has given Joseph 60 days to cure these defaults or the company could be forced to repay the grant money, lose its real estate tax exemption, and face litigation.
“Given the parameters of the agreements [with the city], we hope within 60 days Mr. Joseph will show up and make good on his promises. Unfortunately that hasn’t happened,” said Jeff Limbian, the city’s law director.
Since fall 2020, the city has held weekly or bi-weekly meetings via zoom with Joseph company officials and repeatedly was told they were waiting for a big contract. The last conversation took place “three or four weeks ago,” said Limbian, who described the tenor of the company’s response as “a lot of hot air.”
Brown, who is facing a three-way Democratic Party primary in May, a Republican and possibly an independent challenger in November, emphasized the city’s announcement today “is in no way political. I wanted to do this back in the summer,” he said.
“I would rather have the jobs than three buildings that are not producing,” the mayor said.
The city’s outside counsel, Joseph Houser, sent a letter dated March 26 to Joseph, notifying him that he and his company have failed to comply with the terms of two development agreements signed in 2017.
“You have failed to complete your obligations as set forth in the agreement and the city can no longer ignore the defaults by your company. Failure to cure these defaults could result in litigation and demand by the city for repayment of the grant funds provided for this project,” Houser’s letter states.
“By our calculation, you should have approximately one hundred fifty (150) full-time permanent jobs at the project site. It appears that you have not met the schedule that you agreed to regarding job creation in the Ohio Enterprise Zone Agreement. Your failure to comply can result in the loss of the real estate tax exemption for your project. Therefore, you are hereby notified that you are not in compliance with the terms and conditions of the Ohio Enterprise Zone Agreement entered into in 2017.”
As of today, Joseph, his company and his attorneys have not responded to the letter, city officials said.
In May 2020, The Business Journal and ProPublica published a series of stories focusing on the city’s failed economic-development initiatives and examined the Chill-Can project in depth.
The investigative series found that the city and Joseph were often at odds with one another regarding the project, with Joseph threatening to move the development elsewhere – potentially Florida. The city relented and awarded the developer grant assistance and tax incentives for the project.
Subsequent stories published by The Business Journal found that Joseph had also reneged on the terms of a marketing agreement with Youngstown State University worth $300,000. After The Business Journal filed an open records request with the university, Joseph made an initial installment payment of $100,000 to YSU.
Another follow-up shed light on the developer’s partnership with an investment broker who was stripped of his license in Ohio.
Joseph purchased more than 100 vacant lots on more than 20 acres on the East Side from the Mahoning County Land Bank in 2017 to make way for the project. The city also purchased property at the site and still owns some of the land.
The Business Journal reached out to Joseph seeking comment. He has not replied.
Copyright 2021 The Business Journal, Youngstown, Ohio.