It’s time to call GE’s bluff- GE can afford taxes

GE pays no taxesThe Dayton Public School board is being rushed to vote to give away 15 years of taxes so that General Electric will pay UD payments in lieu of taxes.

The big question isn’t why, but is this legal? The Why is supposedly in the name of “economic development” so that GE won’t go somewhere else and build their fancy new office building with their “80 jobs.”

The question is- how can any legislator vote to release GE, a major government contractor, that spends tens of millions on lobbying, give them the right not to pay taxes without a serious problem with conflict of interest? This deal has GE making “payments in lieu of taxes” to a tax-exempt major Catholic university- UD. Since when did politicians have the right to direct money to private religious organizations? And, btw- the contract is all the way to 2041.

UD will get $373,041 per year for the first 15 years- or $5,595,610. That’s not exactly chump change.

This whole thing stinks.

Let’s also ask how our school board members may have conflicts in interest: Joe Lacey is a county employee, Sheila Taylor is a City of Dayton employee, and Ron Lee sits on the City Plan Board. Are these people able to act without pressure from their employers to do what is right for the schools? At a time when the school system is making cuts left and right- why should GE, a company that paid its CEO Jeff Immelt $15.2 million in 2010, get a hall pass on paying property taxes?

From the Dayton Daily News:

The school board is set to vote Tuesday on a resolution supporting the TIF. City Commission will vote Wednesday to convey the land to a limited liability company set up for the TIF, then vote next Wednesday on the TIF agreement itself, assistant city manager Shelley Dickstein said.

If the EPISCenter property — owned by the University of Dayton and located near the Dayton Marriott — is eventually worth the $20 million that city and county officials project, its annual property tax bill based on today’s rates would be about $645,000.

Dayton Public Schools would normally receive about 65 percent of those property taxes, meaning the schools would be sacrificing $420,000 per year for the first 15 years of the TIF deal.

GE spokeswoman Jennifer Villarreal said the Dayton project was possible only after “significant collaboration” between UD, GE, Dayton, the county and state and CityWide Development Corporation.

Other groups that would lose future tax revenue due to the TIF are the Human Services levy fund ($95,000 annually), the city of Dayton ($70,000), and Sinclair, MetroParks, Montgomery County and the Library system ($10,000 to $25,000 each annually).

“In order to compete with some of the suburban proposals, which included a 15-year, 100 percent tax abatement, we (also) structured the first 15 years as a 100 percent tax-free period,” Dayton assistant city manager Shelley Dickstein said.

via Dayton city schools plan?15-year tax break for GE.

We’ve already seen the beauty of a previous Shelley Dickstein deal- in the Wayne Avenue Kroger debacle, where the city spent millions of dollars to secure a site that Kroger backed out on. There was no hold-harmless clause in the contract to hold Kroger liable if they didn’t perform- the same is missing from this GE deal.

Oh, but GE promises to provide “in kind services to support our students”- but not in writing.

In fact- the promises GE makes are all pretty vague- other than to be able to set their payment schedule for the next 30 years-  without having to renegotiate, or revalue the property, or the taxes due. Why isn’t this option offered to every single business in Dayton? Or is it only to companies who don’t pay any federal taxes- despite being able to pay their CEO a ton of cash.

Here is a mention in the timeline – with no contractual obligation: “GE Aviation will assign an Education Leader for the Dayton area to work with DPS’ next Associate Director of Career Technical Education to begin developing new programs”

The mechanism being used is a TIF- which is covered by ORC 5709.41 section C, wherein a municipal corporation may exempt up to 75% of the real property taxes due on a project that is declared to be an improvement for public purposes for a period of ten years without approval from the local school district- yet with approval from a school district can be increased up to 100% of the real estate taxes and extended to thirty years.

Of course, “an improvement for public purposes” is hard to define- other than the claim that this will bring income tax revenue in. Yet- income tax revenue isn’t spent on schools- which are a necessity last I checked.

GE is getting a four-story building containing approximately 138,355 square feet of rentable space comprised of approximately 51,125 square feet of office space and approximately 87,230 square feet of lab space. It will be owned by 111 River Park LLC and leased to GE Aviation Systems LLC – the true value of this will be $19,200,000 considering the “special purpose nature of the proposed building although the construction costs may be considerably higher.” Read that as- this building isn’t worth as much to anyone else- so we shouldn’t have to pay taxes on what it’s worth- yeah, huh. Try using that same excuse on your house (actually, Raj Soin tried that on his mansion in Greene County- and lost).

The city does take care of the unions for the construction of the building- forcing prevailing wage:

To the extent required by law, Owner agrees that all wages paid to laborers and mechanics employed to construct the Building shall be paid, as required by Chapter 4115 of the Ohio Revised Code, at the prevailing rates of wages of laborers and mechanics for the classes of work called for by the Building, which wages shall be determined in accordance with the requirements of Chapter 4115 of the Ohio Revised Code for determination of prevailing wage rates.

And despite all the mumbo jumbo in the contract- mostly about the value and the waiving of taxes- there is nothing requiring GE to employ a single person- at any wage rate. So the question really becomes- what is the “public purpose” of this deal?

There is an out:

SECTION 12. Severability. Should any portion of this Agreement be declared by a court of competent jurisdiction to be unconstitutional, invalid or otherwise unlawful, such decision shall not effect the entire agreement but only that part declared to be unconstitutional, invalid or illegal and this Agreement shall be construed in all respects as if any invalid portions were omitted.

Which basically says- we screwed up- it’s just because we missed something- and not our fault. Yep- like the requirement to give something tangible back to the city for this sweetheart deal?

I read over 90 pages that were supplied to me from internal sources on this deal- and nowhere did I see a requirement of GE to employ anyone- or create new jobs, or generate tax revenue in any way.

There is no reason for the Dayton Public School Board to grant this abatement, nor is there justification for the City Commission to sign off on this deal.

The only thing that should be done at this point is to put Shelley Dickstein and the entire bunch of “economic development” honchos on the stand and have them state under oath what the “public purpose” is on this deal- and how it is legal to have a government funnel funds in lieu of taxes into a Catholic university’s coffers.

If this deal goes away- the only loser is UD. If it does get done, the loser is every single Dayton Public School student for the next 15 years and 25% of them for the next 15 years after that. Also- it is patently unfair that any business has to pay property taxes in the City of Dayton if this deal is offered to GE but not to any other business. It shouldn’t be legal for the idiots we elect today to create financial trauma for the idiots we elect in the future.

To the DPS board and the Dayton City Commission: vote no. Make GE pay. You’ll be heroes. GE can’t walk away from this deal over what is rounding error on the financial statements. Even if our members of congress can’t stand up to GE- you can. Jeff Immelt can explain how he pulled out to Michelle Obama- who may consider the education of poor black children more important than subsidizing Boeing’s next jet engine.

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10 Responses

  1. David Sparks July 5, 2011 / 12:33 pm
    Why should other Dayton businesses pay their taxes?
  2. Joe Lacey July 5, 2011 / 1:28 pm
    No one is bluffing.  State tax law pits communities against each other in a high stakes game where education funding is the loser.  Individual communities opting out and passing up these developments will do nothing to change state tax law.
  3. David Esrati July 5, 2011 / 1:44 pm

    @Joe- GE is bluffing- and if they do take their building and promised jobs somewhere else- we would actually win on this deal.

    There is no guarantee in this deal that X jobs will be created and X in income tax will be collected-

    There is nothing in writing that GE promises to deliver to DPS- or a dollar value penalty in it- if they don’t deliver.

    Generally, this business major learned in a valid contract, both sides must agree to terms in which consideration or value is exchanged. This isn’t a contract- it’s a donation in lieu of tax dollars to a private catholic university- where you graduated from.

    Some how- I don’t think GE will pull out- or that we’re missing anything.

    Just refuse, on behalf of our school kids- to let GE off the hook for your portion. You owe it to the kids.

    GE never gave us anything in return.

  4. Robert Vigh July 5, 2011 / 2:00 pm
    David: Severability is pretty common in most contracts. It is there because we are not actually legally allowed to sign away our rights. So, regardless what a contract says, even if both parties agree, there can be a judge or ruling that comes in and says that we were not legally allowed to make that agreement. Severability clause, instead of invalidating the entire contract then only invalidates a small portion. Otherwise, one small error which could be unpredictable, would invalidate the entire contract.

    Go government! They treat everyone so equally.

    David, I appreciate fairness and agree with your article that I do not wish to be a contributor of a subsidy to either GE or GOD. But, I do not really care about the schools either. If property tax simply did not exist, I would not have to be frustrated about some people having to pay it and others do not.

  5. somedude July 5, 2011 / 3:08 pm
    Good question: why shouldn’t other businesses “self-abate”?
  6. Jeff Dziwulski July 5, 2011 / 6:27 pm
    This is a TIF.  It is perfectly legit. Chicago is a very aggressive user of the TIF mechanism to redevelop vacant industrial sites, ones just like the old NCR site..actually ones even worse (like the old Ecko site in my old neighborhood).  The idea is to make abandoned urban industrial sites competetive in development costs with unencumbered greenfield suburban sites.

    The deal with TIFs is the tax increment increase, the money the schools and other goverment entities recieving property tax would forgo is used to retire redevelopment costs…usually demolition, hazmat remediation, and the usual site-infrastructure, and maybe the building itself. 

    Otherwise these sites would sit empty for decades since it would cost too much for a private entity to redevelop them.  They are just NOT competetive in development costs with greenfield sites.  This is common sense.

    And, as we know, there are acres upon acres of abandoned sites here in Dayton, a city that appears resistant to using the TIF mechanism as a redevelopment tool.  This is the first one I’ve heard of, at least one at the scale I’ve seen in Chicago.   Yes, I realize everyone here in Dayton hates  Chicago and all it stands for, since thats where those evil liberals are from….but they used to call Chicago the “city that works”.  Make No Little Plans and all that…and yes they have made big mistakes, too (public housing)…..but TIFs seem to be a big sucess story for them.

    I am trying to be positive here as I dont want to junk up this blog with yet another anti-Dayton/anti-Daytonian rant, but lets just say this isnt too controversial, in principle, and it has worked elsewhere.

  7. Ice Bandit July 5, 2011 / 10:25 pm
    …I do not really care about the schools either. If property tax simply did not exist, I would not have to be frustrated about some people having to pay it and others do not.
     
    …at the future dedication of the Robert Vigh Memorial Library, let the above words be chiseled in the entrance’s stone facade. And when students ask what inspired the aformentioned poetry, let historians tell them you were speaking to a confused cult of tax-worshipers who spent part of their time cursing a hopelessly incomprehensible tax code nobody understood, and part of the time defending it…
  8. Bob from the Boro July 6, 2011 / 6:43 am
    The pitting of jurisdictions against each other in a bidding war to buy jobs is a horrible way to handle economic development, and I think the system needs to be fixed.  Unfortunately, we can either pay the game with the rules in place, or get crushed by our opponents as they play the game and kick our backside.  The simple fact is that without the concession on the part of the school district, the facility would have gone elsewhere. 

    Accordingly, I am pleased the GE is coming to town.  The amount of the tax revenue the schools will get is the same that they would receive if the site was not developed and getting a GE research facility is a high profile win for our community.

    BTW, corporations do not pay taxes!  They remit taxes on behalf of shareholders who own the company. 

    If you want the country to get back on its feet, then a majority of the population needs to have skin in the game (by having to pay income taxes) so that they will stop voting for the guy (or gal) that promises to give them the most amount of free money.  Democracy can only exist until a majority of the population realize that they can vote themselves money from the treasury.   If you don’t think we have gotten there yet, then just look at the members of the political class that get voted into office.

    Where is John Galt when we need him?

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