YOUNGSTOWN, Ohio – Financing options offered by organizations such as the Western Reserve Port Authority and Penn-Northwest Development Corp. often can make a big difference in moving a project forward or not.

The Western Reserve Port Authority manages several tools on behalf of local partners, including enterprise zone and tax increment financing and the community reinvestment area program.

In addition, it offers one unique to port authorities – the capital lease program, which allows largescale development projects to realize a sales tax exemption on building materials, Sarah Lown, WRPA’s public finance manager, says.

Among the area projects WRPA utilized the capital lease program for was Kimberly-Clark Corp.’s recently announced $800 million plant in Trumbull County.

The first project to utilize the program was the Hollywood Gaming at Mahoning Valley Racecourse and Casino. More recent projects have included the TJX HomeGoods distribution center, DoubleTree by Hilton Youngstown Downtown Hotel and Ultium Cells.

WHAT IT DOES

A capital lease agreement exempts the purchase of construction materials from sales taxes, but not furniture, fixtures, equipment or machinery.

Such programs are becoming more important to make economic development projects work because of the increased cost of construction for a business, Anthony Trevena, WRPA’s executive director, says. Bricks and mortar can represent up to half of the actual construction cost.

“It’s commonly utilized throughout the state of Ohio for economic development projects or things like housing projects,” Trevena says. For large projects, such agreements are “really important to get those projects across the finish line.”

Boardman-based EDM Management, which owns and operates several nursing homes and assisted living centers, utilized the port authority’s capital lease program to develop three facilities, according to Ed Reese, EDM’s CEO. They are The Inn at Poland Way in Poland, Briarfield Place in Boardman and The Inn at Old Saybrook in Columbiana, on which WRPA collaborated with the Columbiana County Port Authority.

“We were the first local company to utilize that capital lease program,” Reese says. He estimates the capital lease program saved between $350,000 and $500,000 on each project, which combined probably cost nearly $40 million.

“When you go for financing, it’s considered part of the capital stack,” Trevena says, “We frankly probably wouldn’t have a hotel in downtown Youngstown if it weren’t for that. There’s a lot of projects I could point to and say that it really was one of those things that put it over the top.”

While WRPA doesn’t have its own bond fund, it can offer bond financing though other, larger port authorities in Ohio, Lown says. “But for these opportunities we could not attract large-scale projects like Ultium or Foxconn or even the racino in Austintown,” she affirms.

OTHER OPTIONS

The port authority also works with entities on tax increment financing packages. These are used to fund infrastructure improvements, joint economic development districts and property assessment clean energy – or Pace – financing for energy-related improvements.

Penn-Northwest has two direct financing programs that it funds with its own resources, according to Rod Wilt, executive director.

One is the Mercer County Industrial Revolving Loan Fund, which can lend up to $350,000 for real estate and equipment. Additionally, Penn-Northwest can participate with other economic development lenders in the region on loans of up to $1.1 million, Wilt says.

Over the past year, PNDC has closed on five loans for real estate and acquisition, the smallest of which was $110,000, he reports. Through that fund the organization is participating in an $11 million financial package to help with the reopening of Sharon Regional Hospital. Other loans over the past year funded renovation of an office building and equipment acquisition.

“As loans repay, the principal and interest go back into the industrial growth fund,” he says.

INNOVATION FUND

Two years ago, Penn-Northwest created the Mercer County Innovation Fund in partnership with the state-funded Ben Franklin Technology Partnership, to drive technology and innovation in Mercer County. 

“Those innovation funds can be awarded in amounts as low as $10,000 all the way up to $500,000,” he says.

So far, the fund has made two awards: $50,000 of a total $500,000 package awarded to Advanced Power and Energy in Greenville and $10,000 to assist Kevo Brew, which is developing a cold brew coffee system.

“My product offers a way to make cold brew with regular K cups,” says founder Paul McMahon of Transfer, Pa. “This would be the first cold brew coffee maker on the market that can use single-serve pods to make cold brew coffee.”

McMahon says he came up with the idea for a cold-brew system that utilizes the kinds of cups used in Keurig coffee makers while serving in the U.S. Army’s 717th Explosive Ordinance Disposal Unit while stationed in Afghanistan. He and his fellow service members drank a lot of coffee but often had to drink it black.

“I never really liked black coffee when it was brewed hot or even iced coffee because that’s actually also brewed hot,” he says. He liked cold brew and after returning home, the college physics major collaborated with a friend to develop the prototype for his brewer using a 3D printer.

The limited liability corporation he and his partner formed connected with Ben Franklin Technology Partners and PNDC’s innovation fund.

PNDC has “helped out quite a bit,” he says. The $10,000 from the innovation fund is “a big help,” and he also is working on a microloan with the organization to fund tooling needed to manufacture the brewers using injection molding to reduce costs. Additionally, the organization is a certified economic development organization though Pennsylvania’s Department of Community and Economic Development.

Pictured at top: Kevo Brew founder Paul McMahon is developing a cold-brew coffee system.