Ohio Scrap Dealer Faces Trim Of Tax Cut

Allied Consolidated Industries faces losing half its 100 percent tax abatement, but not because the company has a $2 million judgment against the city of Youngstown, Ohio.

Instead, the board that reviews city tax abatements says it's suggesting the 50 percent cut because Allied hasn't met job-creation goals.

If the reduction is approved, the company would pay about $35,000 more a year in taxes.

The city's Tax Incentive Review Council recently reviewed the 52 companies that had abatements during 2001. Members look at compliance with job creation, financial investment and hiring goals. The board's recommendations go to city council, which can continue, change or take away tax breaks.

The 2001 report says companies with tax breaks created 1,305 of the 1,499 jobs they promised. Companies retained 1,989 jobs.

The 2000 report said the 49 companies with tax breaks created 1,313 of the 1,389 jobs they promised and retained 1,797 jobs.

Companies with abatements generated 16 percent less, or nearly $300,000, in city income taxes in 2001 than the previous year. The report shows that such companies generated $1.85 million last year compared to $2.15 million in 2000.

Investments in real estate, equipment and inventory varied only a couple of percentage points from the previous year.

The tax review board recommended that most companies keep their abatements.

The panel still recommended continued abatements for some companies that didn't meet all goals. Those companies either were close to their projections or still early in their 10-year deals. Businesses have three years to meet their promised goals.

The board wanted more information and deferred recommendations on two companies, McCourt Construction and Berry Distributing.

Three other businesses were put on probation for failing to meet either job or investment goals. They are Diver Steel City Tire Shredder, Entire-Enviro Inc. and United Foundries.

Only Allied faces a reduction.

Tax-review board members said a 50 percent tax-break reduction was appropriate because Allied has met its investment goals despite lagging on job creation. The board could have recommended revoking the entire abatement.

City officials emphasized that the company's abatement history — not retaliation over the lawsuit and resulting big judgment — was behind the reduction.

The company pledged to create 50 jobs in 1994 but through 2001 had hired only six people.

Allied already was on probation. The review board made that move the previous year for two reasons. First, the company failed to report hiring information on minorities and city residents. Second, Allied had continued failures in creating the promised jobs.

The scrap metal industry has been depressed for years, which the company has cited before for not making the planned hiring.

The company's lawyer, Chris Opalinski, said he can't help wondering if the judgment played a role in the reduction despite the city's assertions. Opalinski, however, said he wasn't familiar enough with the abatement to comment further.

The recommendation to reduce the abatement is subject to law-department review because of the pending legal case, said David Bozanich, city finance director.

The 7th District Court of Appeals in September reinstated the $2 million judgment for Allied against the city. The city is appealing the decision. The Ohio Supreme Court is expected to rule in the next month or two whether to hear the case.

At issue is ownership of gravel along the bed of the former Pittsburgh & Lake Erie Railroad. Each side contends it owns the gravel.

Allied won the $2 million verdict in Mahoning County Common Pleas Court in April 2000. A judge overturned the jury's award on technical grounds, however. That's when Allied appealed to the 7th District court. Youngstown Vindicator