WOOSTER − The city continues to use tax incentive tools such as enterprise zones and community reinvestment areas to attract companies to provide basic sector jobs like manufacturing.

The purpose of these tools is to spur long-term development and job growth by attracting employers through tax forgiveness incentives, allowing a company to avoid a percentage of real estate property taxes for specified years, said Jonathan Millea, Wooster's development coordinator.

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By requiring a certain number of employees and payroll amounts, he said, the hope is they use that saved money to invest in their property.

"We look very carefully to make sure when we do these projects, that we're doing projects that could very well have alternative locations in other states to locate to," he said. "What we want to do is temporarily protect them from a significant tax increase (to finance new) projects."

For Millea, the goal of these agreements is to attract businesses that have yet to decide on moving to Wooster.

"We level the playing field to make Wooster more competitive to the other city that they're looking at," he said.

The city of Wooster recently reviewed, terminated, amended or renewed 39 such agreements at its annual Tax Incentive Review Council.

What are enterprise zone agreements?

An enterprise zone agreement, as defined by the Ohio Department of Development, is a tool that allows local governments to exempt new business improvements that aim to create jobs from paying a percentage of real estate taxes.

Retail employers are not eligible for this program, the ODD states online.

These agreements can last for decades. In the case of Wooster, Millea said, many projects are exempt from a percent of real estate taxes for the first 10 years but pay taxes in full the following decade.

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According to a Tax Incentive Review Council from August, the city had 13 exempt enterprise zone projects in 2021 that employed 2,521 people with nearly $37.5 million in newly created payroll.

That new payroll is down from 2020, which saw $56.4 million created, the review council found.

Millea said the reason for the 2021 drop in new payroll is that some projects moved into retirement.

Over $670,000 in real estate taxes was forgiven in 2021 while a total of $2.66 million in real estate taxes was collected by the city.

Since the city began using enterprise zone agreements in 2004, Millea said, the city has created $290 million in investments across 22 projects.

Missed targets and non-compliance

All 13 active enterprise zone agreements were continued, including one for E-Pak Manufacturing LLC, which has yet to begin, but not every project is fully compliant.

Of the 13 agreements, five missed targets related to employment and payroll figures but were within the acceptable range to continue the projects.

Baker Properties Mt. Vernon was the only non-compliant property.

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The facility at 1909 Old Mansfield Road was constructed to support Compak Inc.'s expansion with 10 new jobs and 39 retained in Wooster, according to the agreement summary. The property will pay 25% of its real estate taxes through 2028.

This tax incentive agreement was violated when one tenant on the property, a litterbox manufacturer called KittyPooClub, was relocated from another location in Ohio without prior approval.

Job commitments are also out of compliance at the Compak Inc. location, which includes KittyPooClub and Compak LLC. The latter separated from Compak Inc., Millea explained.

Compak Inc. maintained four employees instead of the 49 full-time employees it was required to have in 2021, and sustain through 2038, according to the agreement summary.

To remedy the total job count, the city could modify the agreement for Compak Inc. to "retain at least 10 jobs in Wooster through 2038, as is necessary to ensure compliance with the city's EZ ordinance requiring two years of performance for each year of exemption," the summary states.

Millea said this is an ongoing matter that will hopefully be resolved.

What is a community reinvestment area?

Community reinvestment areas are defined by the state as tax exemptions that benefit property owners "who renovate existing or construct new buildings."

Like the EZ agreements, these reinvestment agreements are split into two periods, Millea said.

The first is an abatement period when property owners pay a fraction of their real estate tax. The second is post-abatement when they pay their full real estate tax.

Wooster has 25 of these agreements as of 2021, according to a CRA review summary provided by the city.

Combined with the 14 companies that are in the post-abatement phase of their agreements, the city estimates a total of $41.8 million in new investments were created since the CRA program was first used nearly two decades ago.

The city earned $232,898 in new taxes in 2021. Nearly $304,000 in taxes were exempt for businesses participating in the reinvestment program.

Millea said most communities restrict CRA agreements to larger companies, but Wooster opened it up to small businesses in an effort to revitalize the downtown area.

"We give small businesses the chance to renovate small storefronts with tax incentives because you're not going to have someone want to invest a million dollars in a 15-foot-wide building," he said, referring to a property on Market Street.

These agreements allow the city to increase basic sector job availability like manufacturing while reinvesting in areas where investors are difficult to find, he said.

Status of Wooster's CRA agreements

Of the city's 25 community reinvestment area projects, 18 are fully compliant reaching the minimum or beyond the minimum employment requirements.

Some projects required new tenants or ownership transfers to be authorized as new participants in these agreements like Grahm Holdings LLC at 120 E. Liberty St. and 124 E. Liberty St. In total, five agreements needed such changes.

The CRA project at Vertical Runner of Wooster saw the building renovated after nearly 20 years of neglect but missed payroll targets by nearly $55,000 in 2020, the agreement summary states.

These missed targets were caused by the pandemic-related shutdown. The business "significantly rebounded" in 2021, reporting $106,000 in total payroll, and continued the project as it is expected to continue to recover in the coming years.

The city reported one mutual termination for Coyote Group LLC to sell its renovated 230 S. Market St. property. The developer was in full compliance as of last year, Millea said.

This article originally appeared on The Daily Record: Wooster reviews tax breaks given to local businesses, manufacturers