Daily Independent (Ashland, KY)

December 17, 2013

No downside

Taxfbreak could help the city attract new businesses

The Independent

ASHLAND — There is no guarantee that a tax-incentive program  the Ashland Board of City Commissioners has given first reading approval will lure any new businesses to the city, but it is a tool Ashland needs  to be more competitive with other cities in landing new businesses.

Under the program, new employers will be able to qualify for rebates of the city’s payroll tax of up to 50 percent over five years, and will be able to use the money as they see fit.

Currently, Florence is the only second-class city in Kentucky with such an incentive program, although Bowling Green has one that’s similar, Ashland Economic Development Director Chris Pullem said.

The tax incentive is not offered to every new business. The mom-and-pop retailers just opening for the first time will not qualify for the tax break.

The program will have two tiers, said Pullem, onee for the city as a whole and one specifically for the Main Street and South Ashland business districts.

To qualify for the former, a business will need to generate at least $2 million in city-taxable payroll per year, Pullem said, which is more than the small retail business with four or five full-time  employees would have. Recognizing this, the threshold for the Main Street (downtown) and the South Ashland business districts is much lower — $250,000 per year in payroll per year.

There are a number of vacant stores both downtown and in South Ashland on 29th Street, and perhaps the tax break will help fill them with new businesses that will bring both shoppers and create jobs downtown and in South Ashland.

The percentage of a business’ payroll tax it qualifies to have rebated will depend on the number of jobs it generates and will be capped at 50 percent, Pullem said. The program will be overseen by a committee chaired by Pullem and consisting of Finance Director Tony Grubb, City Manager Ben Bitter, City Attorney Richard “Sonny” Martin and a representative from the city commission.

Will the tax break lure any new businesses to the city? Maybe. Without mentioning any names, Pullem said the city was currently working to land a new business that could be the first to utilize the program.

Pullem said the program would put Ashland in a much better position to compete with communities in Ohio and West Virginia for economic development projects. According to Pullem, the city recently saw one of its existing businesses move to The Point industrial park in South Point, and there was little it could do to keep it here because “we just didn’t have any kind of incentives to offer them.”

“This will give us a pretty effective tool to compete with,” he said. “In fact, I think it will put the city in the best competitive position it has ever been in.”

Commissioner Kevin Gunderson said he had wanted to city to have such a program ever since the payroll tax was adopted in the late 1990s. Mayor Chuck Charles agreed the incentive program was long overdue. “We’re way behind in doing this,” he said. “It should have been done a long time ago.”

The ordinance creating the program should receive second and final approval at the city commission’s first meeting in 2014.

As we see it, there is no downside to this incentive program, even though the city will not receive as much payroll tax revenue from businesses that qualify for the program, but if a business locates outside  the city because Ashland cannot compete with what other communities are offering, the city will receive zero revenue from the payroll tax from that business. In a sense, the program will generate new tax revenue by giving some businesses a rather substantial tax break.