HomeMy WebLinkAbout92-96 Ordinance
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. -- RECORD OF' ORDINANCES
Form No. 30043
Dayton Legal Blank Co,
. 92-96 Passednn u mm_m m m__mm_ ___mn19n-----
Ordmance NO.mn __ n - ---.~-
AN ORDINANCE TO AUTHORIZE THE CITY
MANAGER TO ENTER INTO AN AGREEMENT
OF INTENT WITH THE ASHLAND CHEMICAL
",... CaMP ANY TO ASSIST IN THE EXPANSION
i OF THE COMPANY'S DUBLIN FACILITY
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WHEREAS, the City of Dublin recognizes the contributions that the Ashland
Chemical Company has made to this community; and,
WHEREAS, the Company is considering an expansion of their facilities; and,
WHEREAS, this expansion in the City of Dublin will create and retain jobs and
improve the economic welfare of the City and the State.
WHEREAS, the City of Dublin is willing to offer assistance to encourage this
expansion within the community due to the increased tax benefits and other
positive contributions which will be forthcoming.
NOW, THEREFORE, BElT ORDAINED by the Council of the City of
Dublin, State of Ohio, 7 of the elected members concurring;
Sccti.mLl, That the City of Dublin, in order to encourage Ashland's expansion of
- its Dublin facility desires to enter into an agrecment with the Company to
enumerate the various ways in which the City can assist in their proposed project.
.... Se.cliol12. That a copy of the agreement is h~reto attached as Exhibit "A".
Se_c.tiOll.l, That the City Manager is hereby authorized and directed to execute
said agreemcnt with the Ashland Chemical Company, a division of Ashland Oil,
Incorporated, The Agreement between the City and the Company, in the form
presently on file with the Clerk of Council, is hereby approved and authorized
with changes therein not inconsistent with this ordinance and not substantially
adverse to this City and which shall be approved by the City Manager. The City
Manager, for and in the name of this City, is hereby authorized to execute that
Agreement, provided further that the approval of changes thereto by the City
Manager, and their character as not being substantially adverse to the City, shall
be evidenced conclusively by his execution thereof.
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I , RECORD OF' ORDINANCES
Form No, 30043
Dayton Legal Blank Co,
. 92-96 Passedn nmU' uu nnnumummmummuu19nunun
Ordmance NO.n u _u m n - u
Page 2
S_e.c1io.n..4.. That this ordinance shall take effect and be in force from and after the
,.... earliest period allowable by law,
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...... Passed this A day of 061 tJ ~ , 1996.
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Mayor - Presiding Officer
Attest:
~~~
Clerk of Council
I hereby certify that copies of this Ord1mmce/Re38h:ltisR 'Were posted in th
. Sponsor: City Manager City of Dl:bl'n :n (1(wrdonce w;t~~ Sed:on 731.25 of the Ohio Revised Code.
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Clerk of Council, Dublin, Ohio
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MEMORANDUM
TO: Members of Dublin City Council /
FROM: Timothy C. Hansley, City Manager
SUBJECT: Inducement Agreement! Ashland Chemical
DATE: September 12, 1996
INITIATED BY: Mary L. Bearden, Economic Development Coordinator
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SUMMARY AND ACTION RECOMMENDED
The Ashland Inc.' s Research and Development function has grown to where there is
a need to add new or expand their research facilities to meet the Company's current
and future needs. Ashland Chemical Company is vying for the expansion to take
place at its Dublin facility. The final decision whether to increase operations in
Dublin or at the company owned Kentucky site, will be made by the parent company,
Ashland Oil, Inc. To strengthen the position for the local site, relative to the
competing location, Mr. Jack Boston, the Administrative Vice-President, approached
the City Administration and requested that we prepare an inducement package to
assist him in this regard, The attached legislation and companion Inducement
agreement reflects several months of negotiations and discussions between the City
and the Company.
The position of the City has always been to analyze and tailor each City inducement
package to a project specific, and is calculated on its own merits to the City. Based
on Ashland's history, for this particular project, the City's tax credit would be
""""'4 minimal, however would enable the Company to leverage their participation with
state programs, The Company has not asked for tax abatement, therefore there is not
a negative impact to the schools, only an increase in property taxes, their funding
source.
The Administration is recommending that City Council adopt this legislation to
ensure that the local site maintains the highest possible competitive position as the
presentations are reviewed at the corporate level. It is presently expected that
information will be forwarded to the Corporate level after the passage of this
legislation with presentations to follow later in October and with a decision and a
commitment from the Company to be made by the end of November. If Dublin is
successful, construction would commence in the Spring of 1997.
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ADDITIONAL CONSIDER A TIONS
- The Company was successful as a result of their last expansion to participate in the
State of Ohio Job Creation Tax Credit program. An additional factor which should
be recognized by City Council is that upon the Company's inquiry to again
-",-",.. participate in the program for this project, they were advised that as of January 1,
1996 a program requirement mandates that the partnering jurisdiction make a local
tax incentive contribution.
CONCIJJSION
It is strongly recommended that this legislation be adopted by City Council to allow
this project to move to its next stage and hopefully to a successful conclusion
regarding the expansion of this facility within the City of Dublin.
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AGREEMENT OF INTENT
BETWEEN
CITY OF DUBLIN
AND
ASHLAND CHEMICAL COMPANY
DIVISION OF ASHLAND OIL, INe.
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AGREEMENT OF INTENT
This Agreement of Intent is entered into on , 1996, between the City of
Dublin (the "City") and Ashland Chemical Company a Division of Ashland Oil, Inc. (the
"Company") for the purpose of inducing the Company to expand its Research and Development
~.... function with the construction of a new facility with an estimated value of $25,000,000 and an
approximate size of 103,000 square feet with construction estimated to commence by Spring,
1997; such construction schedule based on a continuation of the current business conditions.
1. BACKGROUND
The Company has been an important and significant part of the Dublin Community since
1971. During this period, both the Company and the City have experienced growth and financial
success and have enjoyed a harmonious working relationship. The Company and its individual
employees have contributed to the quality of life in Dublin by their commitment to quality
development standards, support of the Dublin Schools, community charitable activities and
".."V',," projects, and service in volunteer and civic positions, to name just a few ways in which the
~,;J!' Company has earned a high level of respect within Dublin and the total central Ohio region.
The Company has identified a need to expand its research and development facilities
which will necessitate the construction of a new building. It is estimated that the planned project
would have a value of $25,000,000 and would be 103,000 square feet in size. The construction
of this facility is estimated to result in the creation of between 100 and 110 new technical and
research jobs in the City of Dublin. It is anticipated that a decision regarding this expansion
could be made on or about October 15, 1996 and would result in a Spring, 1997 commencement
of construction. It is recognized and understood by the City that the Company has existing land
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and/or facilities in the state of Kentucky which, in addition to the Dublin site, are being reviewed
and evaluated by the Company in determining the most beneficial location for expanding the
research and development facility.
To assist in the decision making process, the City desires to enumerate specific
--- cooperative efforts which will be undertaken in the event the Company chooses the Dublin site
- over the other site being evaluated. This effort is being made in recognition that the construction
of this facility and the creation of these additional jobs will provide economic benefits to the City
and will further add to the quality of this community.
Accordingly, the City and the Company wish to set forth certain matters as to which
agreement has been reached and to indicate their intent and agreement in principle with regard to
other matters. Both the City and the Company recognizes that this Agreement may be replaced
or supplemented in the future by more detailed agreements. However, the parties intend that this
Agreement shall set forth those intentions, principles and details as to which agreements have
been reached at this time.
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II. AGREEMENT OF INTENT
The parties, predicated on the previous recitation, intend as follows:
1. Municipal Corporate Income Tax Credit. Ifthe Company is successful in obtaining from
the State of Ohio, an Ohio Job Creation Tax Credit, the City will commit to granting a 50%
credit of new city municipal income tax revenues generated by new jobs, resulting from the
expansion, towards up to 50% of the Company's municipal corporate income tax obligation, for
a five (5) year period. Under no circumstances shall the tax credit to the Company exceed the
Company's corporate Municipal income tax liability.
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2. Parking Requirements. Both parties agree that the intent of the City's zoning code is to
require that an adequate number of parking spaces be constructed to properly serve a new
facility. The City recognizes that the Company's proposed facility provides for a research and
I!IlfC,',.... development purpose with space to be utilized for a wide range of laboratory functions, and
therefore may not be subject to the same parking requirement formula as would an office
building with leased space. The City agrees to work cooperatively with the Company to
determine the facility's parking need and to also satisfy the above stated intent ofthe zoning
code; by assisting the company in obtaining any variance in the required number of off street
parking spaces mutually agreed to.
3. Fee Waiver. The City of Dublin will waive all building fees, zoning fees, and the Dublin
portion of all sewer and water capacity charges related to the proposed expansion.
4. Potable Water Supply. In order to assure the quality of the supply of water to the new
facility, the City hereby confirms that public water supply is available for tapping, adjacent to
the proposed site.
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5. Zoning Code Restrictions/Sideyards. The City Administrative Staff agrees that if the
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Company provides evidence that they, or a closely related holding company or other affiliated
corporate entity, has overall control of the acreage, the sideyards requirements of the Dublin
Zoning Code will apply to the perimeter of the area of control.
6. Coordination. In order to allow for the expansion of this facility in a cost-effective
manner, the City agrees to provide the full support of its staff in assisting the Company to
identify and obtain potential sources of public funding and assistance for the project. The City
will assign its Economic Development Coordinator to work closely with the Company as a
liaison between the City and the Company, and to serve as a coordinator with other agencies and
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levels of government. Specifically, in this regard, the City agrees to act through its Economic
Development Coordinator to seek or identify State assistance on behalf of the Company; such
funds or assistance to be used by the Company to aid with relief of training costs, obtaining a tax
credit through the Ohio Job Creation Tax Credit Authority, or any other eligible costs associated
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with developing this proposed facility or expanding it's operation.
7. Building Permit Process. The City of Dublin will assign its highest priority to help
expedite the building permit process so that Ashland, its designers and contractors can
implement their aggressive construction schedule for the project.
III. INTENTION OF COMPANY
It is the Company's intention to review the Dublin site with full consideration given to
the inducements herein enumerated and in recognition of the other benefits available to the
Company by expanding its facilities in the Dublin community. In the event that the Dublin site
is chosen, then it is the Company's intention to carry out the construction and operation of the
...'~ proposed new facility as contemplated by this agreement and as set forth hereinabove, provided
IIiliMh,,,,,'" the conditions agreed to by the City in this Agreement have been undertaken in a timely manner.
IV. EXPEDITIOUS ACTION
The City and the Company recognize that the creation of additional jobs is a matter of
highest priority, and both parties will use their best efforts to proceed as expeditiously as possible
in carrying out their responsibilities hereunder.
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V. AUTHORTZA TION
This Agreement shall become effective when fully executed by both parties. The City Manager
will sign on behalf of the City following the adoption of an ordinance by Dublin City Council
authorizing such action.
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CITY OF DUBLIN
By
Timothy C. Hansley
City Manager
ASHLAND CHEMICAL COMPANY
DIVISION OF ASHLAND OIL, INC.
By
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OHIO DEPARTMENT OF DEVELOPMENT
George v, Voinovich Donald E, Jakeway
Governor Director
August 2, 1996
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l Mr. David J. D' Antoni
President
Ashland Chemical Company
5200 Blazer Parkway
Dublin, Ohio 43017
Dear Mr. 0' Antoni:
We at the Ohio Department of Development are excited that Ashland Chemical IS
considering an expansion of its Dublin Technical Center. Ashland Chemical is a valued
corporate citizen and Ohio would welcome this expansion that would serve as the
primary research and product development facility for Ashland Chemical,' s worldwide
operations. Such a world class facility and investment would be a tremendous
economic boost to the State of Ohio and specifically central Ohio. As a result, the
State of Ohio is prepared to provide you with the following preliminary commitment
based upon the following understanding of the project:
A. The project would involve a total investment of approximately $22
million.
- B. Completion of the project will result in the creation of approximately 100
new jobs with an average annual salary of $55,000.
~.,".., C. Ashland Chemical is also considering potential sites outside the State of
Ohio for this research and development facility.
STATE TAX INCENTIVES
Ohio Job Creation Tax Credit
Estimated Tax Savings: $1,378,000
The Job Creation Tax Credit allows companies creating jobs in Ohio, when interstate
competition is a major factor, to apply for a credit (or possibly a refund) on their
corporate franchise tax or state income tax. The credit is measured as a percentage
77 S. High St., P,O. Box 1001, Columbus, Ohio 43216-1001 (614) 466-2480
PRINTED ON ~ECYa.ED PAPER
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Mr. David J. D' Antoni
Page 2
of state income tax revenue withheld by the business for employees hired to fill the
new jobs. The business must apply for the credit before committing to the project.
We will recommend a 65 percent, 10 year tax credit for this project based on a
commitment by Ashland Chemical to hire at least five percent disadvantaged persons
- as defined by the Ohio Administrative Code and a commitment by the City of Dublin
to financially support the project in an adequate manner.
.-*!..- Based on the creation of 100 net new jobs, we estimate that Ashlar)d Chemical will
save $1,378,000 over a 10 year period.
This savings amount is based on an average wage of $55,000 per employee, which
amounts to an employee state income withholding tax of $2,120, assuming a 65%
tax credit is awarded for 10 years.
JOB TRAINING
Ohio Industrial Training Program
Under the Ohio Industrial Training Program (OITP), the State can reimburse a company
for up to 50 percent of the eligible training costs.
Eligible training costs include curriculum and material development; instructional
materials, such as texts, manuals and handouts; and the instructor costs, Le. up to
$20 per instruction hour or 50 percent of the instructor's hourly costs, whichever is
less. In addition, the State can pay a portion of the cost of training an employee ~t a
company's out-of-state facility, if necessary.
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\ The State of Ohio will assign an OITP training coordinator to assist the company with
putting together an application in order to secure training funds for eligible training
w activities under the OITP program.
Research and Development Tax Exemption
This tax exemption provides an incentive to assist companies in creating, using, and
perfecting the technologies and products of the future. This incentive is a sales tax
exemption on the purchase of machinery and equipment used in research and
development activities. The exemption applies only to equipment and the equipment
must be used in research and development activities. Qualified research covers both
"pure" (scientific and technical) research work and "directed" research, that which is
aimed at designing, creating or formulating new or better products, equipment or
processes.
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Page 3
The above commitments are contingent upon meeting all individual program guidelines
and the final approval by the Ohio Job Creation Tax Credit Authority and the State
Controlling Board. This commitment will remain in effect for acceptance until
September 30, 1996.
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We believe that this proposal along with available local resources provides the
flexibility to meet the needs of Ashland Chemical. We look forward to working with
.;;4lf you on this critical project. Should you have any questions, please do not hesitate to
contact Mr. Tracy Allen, Senior Development Representative, at (614) 466-4264.
Sincerely yours,
A1-.
Donald E.
Director
DEJ/ta
c: Doug Talbott
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MEMORANDUM
TO: Dublin City Council
- FROM: Timothy C. Hansley, City Manager I
DATE: August 15, 1996
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SUBJECT: Ashland Chemical
INITIATED BY: Mary L, Bearden, Economic Development Coordinator
Please read my attached letter addressed to Jack Boston at Ashland Chemical, Inc, My
intention was to speak to you informally last Monday at the Council meeting, however
the length of the meeting prohibited my doing so.
Ashland representatives are lobbying their Kentucky headquarters to construct the 25
million dollar, 103,000 sq. ft, expansion at their Dublin Research Center vs, building a
new facility in Kentucky. The expansion is planned to eventually accommodate
approximately 100 new employees, generating an estimated $5 to $6 million dollar
annual payroll. Such a payroll would yield approximately $100,000 per year in new
payroll tax revenue to Dublin.
As in the two previous Ashland expansions, their parent company is comparing incentive
packages from the Stale of Ohio and the local community to offers made by the State
""""!' of Kentucky and their local entity, Ashland is desiring to participate in the State of Ohio
Job Creation Tax Credit Program which now requires, as a matter of policy, a local tax
incentive contribution,
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The state provides for a very aggressive use of payroll tax revenues towards corporate
profits tax obligations (franchise tax), including the use of direct rebates of excess
payroll tax revenues to the company, The administration is recommending a limited
participation on the City's part, such as a 50% credit of the new municipal income tax
revenues generated by new jobs in the 103,000 sq, ft, expansion towards up to 50% of
Ashland's Municipal corporate income tax obligation for a five year period,
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As council is aware, income tax revenues from net corporate profits are a relatively
small portion of the City's income tax revenue as compared to the revenue from
employee based payroll tax revenues (10% of Dublin's total income tax revenues as
compared to 80% from payroll taxes in 1995). In the case of Ashland Chemical, the
City received no revenue from net corporate profits taxes in 1995, but received
~ $1,193,143,20 in payroll tax revenue, The five year trend is as follows:
I YEAR CORPORATE TAX REV. PAYROLL TAX REV,
.... 1990 $122,718.39 $ 801,397,80
1991 $107,001.07 $ 919,776,05
1992 $146,706,61 $ 981,662.22
1993 $ 18,820,92 $1,027,423.75
1994 $ 39,679.00 $1,112,580.58
1995 $ 0,00 $1,193.143,20
The Jobs Tax Credit program allows both the State of Ohio and the City of
Dublin to "credit" a portion of the payroll tax revenues from facility expansions
or new constructions toward a firm's state or local corporate franchise or nets
profits tax obligations. In cases where the credited payroll tax revenues exceed
the corporate tax obligations, the program actually allows the state or the city to
"rebate" the difference to the firm.
In our evaluations of the likely economic impacts of proposed development projects
in Dublin, the staffhas historically only focused upon payroll tax revenue because the
corporate net profits tax revenues have not generally been a relatively significant
source of revenue and, as can be seen in the historic data on Ashland, are typically far
~- less predictable.
It appears that the State of Ohio has established a policy not to provide Jobs Tax
Credits unless the municipality also offers some type of tax incentive. The tax
IW.;;, credit formula recommended by staff is quite conservative in that;
- it provides a relatively smaller than allowed tax credit of the revenues
produced from the newly created jobs in the expanded facility;
- the credit is applied towards a relatively small part of Ashland's municipal
corporate tax obligation;
- the credit is applied for a relatively short period of time; and;
- the formula does not provide for any type of tax rebate to Ashland if the
credit exceeds Ashland's corporate municipal income tax liability,
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Applying the recommended formula to a specific example would work as follows:
- Assume Ashland's total Corporate net Profits Tax (CPT)
obligation (from all of its Dublin facilities) to be $ 80,000
- - Assume that the municipal Payroll Tax (PT) revenues from
new jobs created in the 103,000 sq, ft, Ashland expansion are $100,000
- - Eligible portion of payroll taxes to be utilized as a tax credit
equals 50% of $100,000, or $ 50,000
- Maximum eligible CPT reduction is 50% of $80,000, or $ 40,000
- Therefore, the value of the tax credit would be:
Up to 50% ofPT, not to exceed 50% of CPT or
Up to $50,000, not to exceed $40,000
Ashland would be entitled to a $40,000 reduction in that year's net corporate profits tax
obligation to the City of Dublin. Under the staff's recommendation, the unused $10,000
portion of the payroll tax credit would neither be rebated to Ashland nor would it be
carried forward for possible application to its future years' corporate tax obligations,
None of the existing, new, or future municipal tax revenues from payroll taxes would be
affected by this recommended formula. As can be easily seen, the actual cash benefit to
Ashland is rather minimal, and in a year such as 1995, the benefit would be zero but
the benefits to Ashland under the resulting State credits are far more substantial.
Representatives of the State Department of Development have indicated that Ashland will
..,...~ not be eligible for the state credits unless Dublin participates in the program in some
manner. Staff believes that the relatively small impact of the municipal incentive will
likely leverage far more significant benefits to Ashland from the state program, It should
~. be noted that if the state chooses not to approve a tax credit, Dublin is then precluded
from offering any local tax credits,
Council has supported the Administration in the past in our recommendations to aid in two
prior Ashland expansions, As was the case in the two prior efforts, our local contribution will
attract substantial outside funding. Please contact me if you have any questions or concerns
with this proposal, Unless I hear otherwise, the Administration plans to prepare legislation
to implement this proposal for your consideration at the September 16 Council meeting,
Attachment
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August 8, 1996
Mr. Jack Boston
;,.}~~~y i IF L~~.3;~L\ Administrative Vice President
6665 Coffman Rood P.O. Box 2219
- Dublin, Ohio 43017.1006 Columbus, OR 43216
Phone: 614/761-6500
Fox: 614/889-0740 Dear Mr. Boston:
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The City of Dublin is extremely pleased that Ashland Chemical Company is
considering another expansion to its headquarters facility in Dublin, Ohio. As in the
past, it is our clear desire to partner with you in your efforts to convince your parent
company, AsWand Oil, Inc., that this expansion should take place in Dublin, Ohio
rather than any of your Kentucky-based facilities.
As we currently understand the proposal, the expansion would include a new or
expanded 103,000 sq. ft. research facility with a total estimated construction cost of
$25 million, and would ultimately result in the creation of approximately one
hundred new jobs with a total annual payroll of $5-$6 million. Short-term
employment projections would include the immediate creation of sixty plus jobs with
a total payroll of $3 - $4 million.
As you are aware, the City has twice provided significant incentive packages in the
past to help AsWand Chemical grow and prosper in Dublin, Ohio (total value $4
million). Based upon your current planned expansion, the City Administration
would recommend to Dublin City Council that the City waive all building permit
.....""" fees and the Dublin portion of any sewer and water tap charges (the value of these
fee waivers obviously depends upon a more detailed understanding of the
requirements of your proposed expansion). The City also commits to staff support
ll;t",..,,! for assistance with potential funding agencies and, as in the past, expediting the
building permit process.
Although the City of Dublin has never recommended or approved the use of the
Municipal Income Tax Job Credit, the Administration is willing to recommend to
Council the use of this tool to assist you in obtaining assistance from the State of
Ohio. An example of such a local credit could be a 50 percent credit of the new
municipal income tax revenue from jobs created as a result of this expansion
towards up to 50 percent of Ashland's municipal corporate income tax obligation
for a period offive years. It should be noted, of course, that the City's ability to
offer such an incentive in Ohio is conditional upon the State of Ohio approving a job
tax credit for this expansion. Obviously, this offer is also condilioned upon the City
of Dublin and Ashland Chemical executing a mutually satisfactory Tax Credit
Agreement which would be required to implement this measure.
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Mr. Jack Boston
August 8, 1996
Page 2
The City believes that this offer is indeed a strong measure of our on-going
commitment to AsWand Chemical. Your firm would be the first Dublin company for
whom we would consider the use of the Municipal Income Tax Job Credit. Of
course, we would be happy to discuss with you in greater detail the specifics of our
proposed incentive package. Please feel free to contact either myself, Terry F oegler
.,.,.,.'''''t or Mary Bearden to further discuss these matters. Also, please let me know if there
is anything else we can do to assist you with your proposed expansion plans.
... Sincerely,
Timothy C. Hansley , .-/
City Manager y
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cc: Terry F oegler
Mary Bearden
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