TALLMADGE: Businesses new to the city will have to meet a higher standard to qualify for a tax abatement, but a lower threshold will continue to reward existing companies for expanding operations.
The changes reflect a study that shows the great majority of new job creation comes from growth within the city, Economic Development Director Dennis Loughry said, so the city wants to preserve enough revenue for that segment.
Also, by not offering the lower threshold to small businesses that simply relocate from a neighboring community, Tallmadge is supporting a countywide anti-poaching movement that recognizes true economic growth comes from attracting business from outside the region.
The city is rare in that it offers a uniform tax abatement program to all businesses that qualify. In most cities, such incentives are negotiated on an individual basis.
Until now, Tallmadge offered a standard 50 percent abatement on new or existing businesses that bring at least $250,000 in new payroll to the city, Loughry said.
A City Council-approved measure has now raised the minimum to $500,000 for new businesses, or $1 million in the case of retail operations, Loughry said.
Loughry said the major reason behind “tweaking” the abatement rules is that his staff has limited resources and the city has a tight budget, so the city wants to save the more lucrative resources for loyal in-town businesses.
“Once you understand most of your growth, you see an overwhelming amount … comes from companies that are already committed to you,” Loughry said.
The secondary consideration relates to an anti-poaching pact that Tallmadge and most other Summit County cities and villages have signed. In the pact, they agree if a company moves from one signatory community to another, the two will share income taxes for a time to ease the financial loss.
So far, Tallmadge has only been on the losing end of that pact. One business recently left town for Akron when Tallmadge could not find an appropriate space for it.
Loughry said the pact worked just as it should. Akron officials called the city to make sure everything was done to keep the business in town. Now the two communities will sit down to iron out a temporary tax-sharing plan.
But if Tallmadge ever gains a business from a neighbor, it will be the one having to dole out a share of the income taxes.
So raising the threshold of new business abatement to half a million dollars will make it easier to part with a portion of the income tax, Loughry said.
“It’s hard to abate a company bringing in $250,000 in payroll if I have to share it with another community,” Loughry said.
Aside from the pure financial aspect, Loughry said he supports the philosophy behind the tax-sharing pact.
“A huge part of economic growth is seeing the region do well and Akron do well,” Loughry said. “… A lot of our residents work in Akron [but] they sleep and live in Tallmadge so we get spinoff businesses like restaurants and hairdressers and doctors.”
Loughry said he understands why some cities have not yet joined the pact, but “we just know based on our own demographics and where we’re located, we benefit when Akron grows,” he said.
Mayor David Kline said when he appointed Loughry to the post, he asked him “to look at every tool that’s in our basket, from incentives to the zoning code to the design control district and compare us to neighboring communities. We’ve been working on that and it’s still a work in progress.”
Kline said $500,000 is still a low threshold for a business that wants to relocate to Tallmadge.
“We don’t want to give away the store,” he said. But he’s also glad the $250,000 target remains for existing businesses that want to expand.
Loughry said another change in the tax abatement program is that the incentive lasts for five years for all industry types. Previously, the tax break lasted five years for manufacturing jobs and just three years for commercial jobs.
The Tallmadge abatement is not available for businesses locating to or expanding in the Joint Economic Development District between the city and Brimfield Township. There are other incentives available for that property.
Paula Schleis can be reached at 330-996-3741 or firstname.lastname@example.org. Follow her on Twitter at http://twitter.com/paulaschleis.