Reimburse Income Tax for New Payroll? Council Committee Hears Proposal

YOUNGSTOWN, Ohio – Members of City Council are contemplating a new incentive for businesses based on new payroll they generate.

Under the proposed job creation incentive grant, businesses coming to or already operating in the city that added $500,000 or more in payroll could be reimbursed up to 100% of the income tax generated by the new payroll tax paid to the city.

During the first year, a business would receive a grant equivalent to 100% of the new payroll tax, currently at 2.75%, paid to the city. In the second and third years, the business would receive 50% and the fourth and fifth years 25%. A business would not receive the grant up front but rather after the tax has been collected to ensure that that it was meeting the $500,00 threshold. 

“If they sustain that additional $500,000 in payroll, then they qualify for the reimbursement for up to five years,” T. Sharon Woodberry, city economic development director, said. “This is an opportunity for us to look at the income tax that we have in place creatively,”

Woodberry outlined the proposed incentive at Tuesday’s meeting of City Council’s community planning and economic development committee meeting.

Similar incentives are offered in other parts of Ohio, she said. The grant would be unrestricted, so the company receiving the incentive could return the money to employees in the form of bonuses or use the funds to offset other company costs.

The proposal drew mixed reactions from council members.

Seventh Ward Councilwoman Basia Adamczak, chairwoman of the committee, supports the program. 

“It’s great that we have other incentives to bring companies in,” she said. Under the city tax abatement program, the city would often award the incentive only for the company to fail to meet its job creation targets. But this program provides the incentive “on the back end.”

Adamczak said she did not expect a company receiving the incentive, having invested in facilities here, to leave at the end of the five years.

“You’re right. They’re not going to leave after they’ve made that type of investment unless the company just goes belly up – and that happens,” Woodberry said.

“I definitely greatly appreciate this,” First Ward Councilman Julius Oliver said. He has expressed concerns about companies leaving the city because of the income tax rate and how to retain and attract businesses.

“That’s a considerable amount of income tax we’re foregoing,” Third Ward Councilwoman Samantha Turner said. “I just don’t want to lose our shirt.” She supported having some type of a ceiling on the incentive.

“That’s something we can discuss [but] you don’t want it to be not a lucrative enough tool for them to come here,” Woodberry said.

Woodberry said she has had conversations with a company that has a payroll in excess of $2 million interested in relocating its headquarters to the city. Representatives of the unnamed company like the proposed incentive and understand it is in the discussion stage, she clarified.

 “You guys decide whether this is a number you’re comfortable with or not,” she said. “When they’re making that type of investment [and] it has that many employees that are coming here, we should be willing to talk about a higher number.”

Woodberry said she has floated the concept to “some of the significant real estate holders in downtown,” and Oliver has participated in those discussions.

Sixth Ward Councilwoman Anita Davis also expressed support for limiting the dollar amount of the incentive.

“We don’t have a loss but we don’t pick up,” she said. Additionally, she expressed concern over the income tax money the employees pay being given as grants to their employers.  

When the city provides performance grants or other incentives to businesses, those represent revenue that the city gets in the form of taxes, Woodberry said.

“We provide incentives to companies in lots of different ways. Here we’re looking at providing it based on what they are bringing to the table,” she said. “This is a framework for you guys to take a look at.”

The program would provide additional tax revenue gradually throughout the term of incentive, and could generate more money from direct and indirect spinoff businesses, she said.

Adamczak said she is ready to move forward with having draft legislation prepared for discussion at the next committee meeting May 4. She also plans to invite the city’s finance director, Kyle Miasek and law director, Jeff Limbian, to the meeting to provide clarification for committee members to consider and amend the language, if necessary.

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