Most industrial sites within Jefferson County are located within an Ohio Enterprise Zone, which allows the community to negotiate a tax abatement for new industrial and warehousing construction (including expansions of existing buildings) that will result in substantial job creation. Most areas within the county have tax rates ranging from $50-$60 per $1000 of assessed value (the assessed value is 35% of the County Auditor’s full value placed on the property). An average abatement for a project that will create at least 25-50 new, well-paying jobs is 60% for 10 years. For a $3 million construction project this would translate to an annual savings of approximately $30,000 in local property taxes. This scenario is provided only for illustrative purposes. Each case is analyzed for its unique economic impacts (job creation, contributions to the tax base, and overall strength of the company). Application is made through the Port Authority but local governments hold the approval powers. Applications that request abatement beyond the 60% threshold in townships or 75% in municipalities also require school board approval.
In addition to the Enterprise Zone, the communities of Mingo Junction and Steubenville have Community Reinvestment Areas (CRA), which offer abatement to residential and retail construction, as well as industrial. The Mingo Junction CRA was created in 2015 and requires pre-construction negotiation, but Steubenville has a grandfathered CRA (created prior to 1994 when State CRA laws changed) that offers a unique automatic tax abatement of 100% for a 15-year term for any construction within the Central Business District (CBD). Thus, negotiation with the local government is not necessary to utilize the Steubenville CRA program. Contact the Port for more details.
Industrial Revenue Bond Financing
Ohio’s Port Authorities are often used as a financing vehicle for large capital investment projects. Revenue bond financing involves the sale of bonds in the Port Authority’s name, backed by the credit and revenue stream from the company. When combined with traditional financing, low-interest bonds can be a great strategy to unlock more cash flow during an operation’s early years. It is important to note that, while Port Authorities are Ohio political subdivisions, Ohio law grants Ports greater flexibility than traditional governments. For example, the private company can benefit from confidentiality up to and until a project is under contract. Also, Port Authority financing does not trigger Ohio’s prevailing wage or competitive bidding laws.
Capital Lease Structure
Ohio law grants this very unique tool to Ports for large capital intensive projects. A capital lease allows the Port to hold title to the assets in order to comply with State law, but the entire facility is leased back to the company, with the company also serving as construction agent. This financing mechanism allows the company to receive an abatement of all sales taxes associated with the materials purchased for construction. Example: a $15 million construction project might have 50% of those costs directly tied to materials. With a sales tax rate of 7.25%, the company will save over $540,000 during construction. As with bond financing, this program does not trigger Ohio prevailing wage or bidding laws, but the Port does require a service fee as well as legal fee coverage as part of the transaction.
Tax Increment Financing
Often, large projects require substantial new installations of public infrastructure. A tax increment financing (TIF) district is a concept of capturing all of the future real estate taxes within the development zone, and then paying the financing costs of the infrastructure with that revenue stream. In Ohio this concept requires local government and school board approval, but the local Port Authority is often utilized as overall project manager and escrow agent for the tax revenue stream.
