Policy group says action ill-advised
by John Nolan

Dayton Daily News

DAYTON | Legislation that Ohio House Speaker Jon Husted is promoting as a means to encourage Delphi Corp. and auto industry employers to invest in their plants and keep jobs in Ohio may be ill-advised, a policy research organization says.

The proposed legislation would drain state tax revenue and could even subsidize automakers or auto parts suppliers that reduce their Ohio work forces, according to Policy Matters Ohio, a Cleveland-based research organization.

The bill also could be taken advantage of by healthy auto industry companies without requiring additional commitments beyond factory improvements they had already planned to make, the organization said.

“We believe this is a flawed bill that should not move forward in its current form,” Zach Schiller, the organization’s research director, wrote to members of the state House Economic Development and Environment Committee, where the legislation awaits its first hearing on Wednesday in Columbus.

“There are numerous flaws in the bill as written, which would make five companies in the state General Motors, Ford Motor, DaimlerChrysler, Honda and Delphi eligible for credits based on their employment of at least 7,500 workers,” he said.

The legislation would rework Ohio’s job retention tax credit by lowering the investment required of auto industry employers to qualify for an exemption of up to 75 percent of a company’s corporate franchise or income tax liability.

Republican leaders say it is needed to reduce the tax burden on employers in the financially strapped auto industry, a key Ohio employer.

Schiller said, however, that the state could better support auto jobs and auto industry workers by expanding economic initiatives to support product development at struggling factories, or providing assistance for other companies that could hire laid-off auto workers at good pay and benefits.

Delphi filed for bankruptcy reorganization in October.

The auto parts maker employs 50,000 people in the United States, including 5,700 at five Dayton-area plants.

Delphi has 13,000 employees statewide.

House Republicans, including Husted of Kettering and Rep. Randy Law of Warren, who introduced the bill on Nov. 15, said it is needed because the auto industry is a key employer in Ohio and faces economic challenges.

“We hope it’s a difference-maker for us in Ohio, in competition with other states,” said Law, a member of the committee which has the legislation.

“We’re working to keep jobs in Ohio,” said Karen Tabor, spokeswoman for Husted. “As with any proposal, there are folks on both sides of the issue. If there are concerns, we need to work those out.”

Labor union leaders and regional politicians turned out to show their support for the legislation when Husted revealed it at a Nov. 3 news conference in Dayton.

Wes Wells, the AFL-CIO’s Dayton regional director, said he supports the legislation.

“I just hope it isn’t too little, too late,” Wells said.

Husted hopes the bill will be passed by the House and Senate next year and sent on to Gov. Bob Taft for signing, Tabor said.

The governor has said he supports the legislation.

Delphi appreciates the legislation, but is unable to say whether it would affect the company’s long-term plans until a plan of reorganization is crafted to help Delphi emerge from bankruptcy in 2007, spokesman Brad Jackson said.

Richard Stock, director of the University of Dayton’s business research group, said the legislation is likely to have little effect on Delphi’s decisions on which plants to keep open.

The key is Delphi’s negotiations with its major unions to try and fashion new, cost-cutting labor agreements, Stock said.

Policy Matters Ohio has raised valid criticisms of the legislation, he said.

“You’re foregoing some extra income that you could have here,” Stock said.

To receive the tax credit under existing law, a company must invest $200 million in a single work site, or $100 million if the current wage rate for the jobs to be retained is at least 400 percent of the federal minimum wage, which is $5.15 per hour.

Under the proposed legislation, auto and parts manufacturers with at least 7,500 employees statewide could qualify for the tax break by investing at least $125 million at various sites across the state, as long as the wage rate at those sites would exceed 300 percent of the federal minimum wage.

Such a job would pay at least $32,000 a year, Husted said.

To be eligible to receive the full tax credit, a company would be required to keep 90 percent to 100 percent of its employees.

Those keeping fewer workers would receive a tax credit based on a sliding scale.

If Delphi received the full tax credit, it would cost Ohio $20 million in tax revenue, Tabor said.

If all the eligible companies received the maximum tax break, the state’s cost would be more than $100 million, she said.

The Senate Finance and Financial Institutions Committee Tuesday quickly passed out SB236, which lays out the implementation of Third Frontier provisions and the Job Ready Sites program approved by voters in November in State Issue 1.

The bill passed with unanimous support and included amendments from both sides of the aisle.

Most of the amendments passed dealt with technical changes, although Democrats were successful in getting amendments that would 1) require out-of-state entities that break an agreement for Third Frontier money pay back both the grant money and other support given plus interest; 2) require the Third Frontier Commission provide written explanations that are presented at one of the commission’s meetings if it uses an independent reviewer of a proposal and then either awards support for a project that the reviewer doesn’t recommend or refuses to support a project a reviewer does recommend; and 3) require the Department of Development to post annual reports on the progress and status of eligible projects and the annual report of the director, among other reports.

The components of the bill were outlined by Tim Keen from the Office of Budget and Management and Mike Suver from the Ohio Department of Development.

The bill includes provisions that expand the Third Frontier Commission from three to nine members, including the director of the Ohio Department of Development, the chancellor of the Ohio Board of Regents, the governor’s science and technology advisor and six members from the central, west central, northeast, northwest, southeast and southwest portions of the state.

The bill specifies lead organizations on all Third Frontier Project awards must be an in-state entity that has a substantial presence in Ohio while specifically prohibiting the state from taking an ownership interest in any project it supports. The primary benefit must occur within Ohio.

SB236 also establishes the Job Ready Sites program to assist in the development of sites and buildings that companies looking to invest in the state can utilize.

The committee heard testimony from Jon Honeck of Policy Matters Ohio, who said the bill contains safeguards to ensure the Third Frontier program is open and accountable. He also recommended a number of other changes such as companies selling products and services that were commercialized using Third Frontier money should offer them to state and local governments at the lowest best price; the Third Frontier Advisory Board should include an owner or representative of a minority-owned business, an expert in community economic development from a nonprofit organization that works with economically and socially disadvantaged individuals to provide training or support for entrepreneurship, an expert from a nonprofit environmental advocacy organization with a background in regulatory affairs and a representative from a labor organization; periodic audits by the state auditor; and competitive bidding for contracts for program administration and requirements for the review of potential conflicts of interest by contractors and employees.

Honeck said Policy Matters would like the committee to consider penalties for nonperformance by a grantee and full disclosure reports from Third Frontier Commission members.

Christopher Derrington of the Ohio Center for Innovation and Commercialization discussed making sure Third Frontier money is used in all of Ohio. He said there is a disconnect that makes it harder for rural Ohio high technology entrepreneurs to gain investment capital because many pre-seed capital grants have gone to larger counties and have been invested primarily in urban areas.

Higher Quality Properties Being Auctioned
by Natalie Morales

Springfield News-Sun

Clark County hit an all-time high in foreclosed properties for auction Friday with 71, including those for delinquent taxes, up for bidding.

Clark County Sheriff Gene Kelly, who also serves as the county’s foreclosure auctioneer, moved the auction from its usual location in front of the stairs on the first floor of the Clark County Courthouse to the second floor courtroom to accommodate the large crowd that gathered.

“We’ll stay in the courthouse for the rest of the year, but I’m thinking we might have to find a place to relocate the auctions in ’06,” he said.

The appraised amount for the 71 foreclosures, including 34 for delinquent taxes, was more than $3 million, according to the sheriff’s office. But not all properties are sold.

Of the 71 properties for auction, bidders bought 25 – 13 of which were delinquent tax sales, according to the sheriff’s office.

Kelly said when he first began auctioning county properties 19 years ago, the auctions were only once every six to eight weeks.

Over the years, the number of properties increased, and the auctions became more frequent – once a month, bi-weekly and now weekly.

The county’s general fund receives 1.5 percent of the purchase price for auctioned properties, excluding delinquent taxes, Kelly said.

Friday, $937,169 was collected, meaning $14,057 will go toward the general fund, he said.

Clark County has the state’s fourth highest foreclosure rate, according to a report from Policy Matters Ohio, a Cleveland-based research institute. Ohio has the highest foreclosure rate in the nation.

“We’re one of the leaders it’s not a good kind of recognition,” Kelly said.

Last year, the county recorded 1,041 foreclosures, collecting about $49 million, Kelly said.

As of the last week in November, 967 forecloses were recorded this year, totaling about $50 million, he said.

“We think part of the reason there’s a slight decrease in foreclosures lately is because of the new bankruptcy laws,” Kelly said. “But we’re expecting a big spike come February with Christmas bills due and job losses.”

The properties being auctioned are better quality and increasing in value, causing the collected cost to increase while the number of properties decreased, he said.

The highest priced property sold for $295,000 Friday and included a Springfield home the purchaser planned to move into.

“People used to think it was confined to one part of Springfield and what we’re finding is that it’s all over,” Kelly said, adding that properties were sold in almost every township Friday.

A variety of patrons packed in for the standing-room-only bidding, including investors, bank representatives and individuals seeking future homes for their families.

“My whole goal in being aggressive and trying to sell these properties is restoring neighborhoods,” Kelly said.

He said it’s always better for individuals to purchase the properties than for banks to buy them back because the individuals are more likely to attend to maintenance immediately.

“As quickly as we possibly can, we want families to move in and turn these around because they affect the neighborhoods,” Kelly said.