 Below is the section in the agreement that defines what businesses
would be eligible. The problem language is italicized:(Copy as
received)
SECTION 7 (h) -
Enterprise Zone benefits shall be limited to those projects
involving essentially manufacturing operations including the
assembly , fabrication, repair, restoration, or creation of
products, also included are commercial storage, warehouseing,
distribution, telemarketing, phone order centers and health care
facilities.
Residential and
retail projects are not eligible nor are commercial enterprises
defined as businesses whose principle revenue comes from on-premise
sale of food, beveragesm gasoline, durable goods or merchandise of
any kind or the offering of services.
The Zone
Administrator shall be the judge of eligiblity.
Will D'Andrea took over management of the enterprise zone at the
end of last year. During his reorganization of the department, he
noted that according to language in the more recent contracts he
holds, there appeared to be businesses participating in the
enterprise zone that do not qualify.
He began digging back through history. Through his investigation
D'Andrea found that more than a dozen businesses, primarily located
in Lincoln's new west-side business district, had applied for and
received enterprise zone designation under the non-qualifying
contract language.
His looked for more details, digging through meeting transcripts,
and noted that the original 1987 contract wording allowed for these
recent types of businesses.
He discovered that the language was changed during an afternoon
public hearing in 2004 when Steve McClure and Andy Hamilton, acting
as consultants for Formosa, brought forward a request for enterprise
zone extension to Illiopolis, which is in Sangamon County.
He then took this information to Lincoln's city attorney, Bill
Bates.
Bates in turn examined the city's documents. He found the same
language as the contracts D'Andrea had in hand and contacted
businesses to see what their contracts read, which also turned out
to be the same language that actually disqualified them.
The problem confirmed, D'Andrea turned to the consultants who had
brought the language forward in 2004, who are experts in enterprise
zones. They created an amended proposal that reversed the 2004
language and put back in restaurants, gas stations and businesses
that have already been added to the zone.
The matter was then taken to the city council and county board.
(See article:
D'Andrea explains enterprise zone dilemma to the city)
D'Andrea told county finance committee members: "The city
responded that these are the kinds of businesses that the
city of Lincoln does want to do business with."
When the full county board met, members engaged in a lengthy and
diverse discussion of the Lincoln and Logan County Enterprise Zone.
Chuck Ruben noted that there are gray areas about what types of
businesses can qualify. He suggested that clearer language would
benefit some types of businesses such as agriculture. Specifically,
language should be included for grain elevators or the coal mine,
especially since that opportunity was opened to those businesses
last year, he said.
D'Andrea jumped in to support Ruben's comments.
"Yes. What we've been talking about with the city, since we have
this window of opportunity to amend this language, is to make as
clear as possible what types of businesses you want to receive these
benefits," D'Andrea said.
He illustrated: "One type of business that recently benefited was
the Scully Building downtown. That's exactly the type of building
redevelopment you want to have happen. That's an office use. Office
uses are not on this list."
D'Andrea emphasized that "who to include on the list is an
important decision." He recapped that the reason for the enterprise
zone is to attract businesses to the community, and now is an
opportunity to discuss and decide which types of businesses we want
to offer these types of advantages to.
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While organizing the department, D'Andrea created a spreadsheet
that tracks the 10-year property tax abatements granted to
businesses on their new construction. Property taxes dollars that
were abated in 2009 amounted to $750,000.
The property tax breaks are a good economic incentive tool,
helping to reduce costs for the business, D'Andrea said.
"The trade-off is a shift in the tax burden," he said. "It
becomes important to consider what types of businesses do we deem
worthy to offer these incentives to."
Ruben added that due to the tax caps the county is under, the
$750,000 abated would have resulted in no more levy for most of the county
entities.
Pat O'Neill, Andy Anderson and Kevin Bateman each raised
questions about what language is in place or might be added if a
business does not stay to fulfill its 10-year agreement.
D'Andrea said there's still a building there and someone still
owns it and is paying taxes on the property. Sales taxes a business
might be bringing in would be lost.
Ruben explained a more complicated likelihood that property would
go back to its previous value and no enterprise zone status.
He then shifted the focus back to the purpose of the enterprise
zone, saying: "If you don't make the offer of the incentives,
somebody else will. They'll (another county or state) take their
chance of a business staying or leaving, and you just won't get the
shot at all."
He illustrated: "It's what happened with Sysco. They
said, 'We can go here or we can go to Indiana -- makes us no
difference. Who's going to make us the offer?'"
Ruben continued: "We made them an offer, and they stayed here. If
they leave tomorrow, we made a bad deal. There's not anything you
can do about it. You really are making a business decision in the
dark. And, some business decisions work out and some don't."
O'Neill pressed. He wanted to know if there was a way to hold
accountable the types of businesses that move from one place to
another, staying only as long as the incentives last.
Carlton responded that there are two sides to this equation, not
just the taxes that would come with new business.
"If you don't bring
business here, you're going to miss out on the sales receipts;
you're going to miss out on the jobs. All this economic development,
the whole game, is on enticing people. You put that caveat in there,
you're going to lose," he said.
Everyone was in agreement as to the desired purpose of the
enterprise zone -- to attract businesses -- but that it is time for
a thorough review of what types of businesses the area now wishes to
attract. Once that is decided, the language should be amended and
the process of zone approvals should be further defined.
Terry Carlton commented that this whole revelation shows how
things can get out of kilter. He complimented D'Andrea on his
handling of the matter.
"I like his jot-and-tittle acumen investigating this," Carlton
said.
He added: "I think the end result is that the planning and zoning
underneath Dr. Hepler (committee chairman) will bring this forward with good
identification and added checks and balances in place."
The planning and zoning committee meets March 2 at 6:30 p.m. in
the Logan County Courthouse.
[By
JAN YOUNGQUIST]
Past related article
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