Local Politics: The faulty math behind Columbus’ broken tax abatement system

Much has been said about City of Columbus tax abatements that likely does not need to be repeated. They create real, negative impacts on our city coffers and our public-school funds. Generally, the pro-abatement crowd within the city’s employ will justify abatements by saying that they create net benefits in jobs, property taxes and income taxes. This assumes they are structured properly and are canceled when they don’t create the promised results. As anyone who has paid attention to Columbus tax abatements can tell you, these are false assumptions.

This week’s City Council agenda includes the annual recommendations from the Tax Incentive Review Council (TIRC) on current tax abatements. The Department of Development presents documentation to Council describing the TIRC review process, including abatements that it recommends should continue and, well, I’m not sure what the other option is, because it didn’t recommend that any abatements be discontinued unless they had already naturally expired.

If you read the details on some of the deals, you would be hard pressed to agree with Department of Development Director Michael Stevens when he says that “all programs were moving in a positive direction.”

The deal that stands out the most to me was that with manufacturer Hirschvogel, Inc. The TIRC found that this deal was out of compliance and recommended a strongly worded letter be sent by certified mail requesting that Hirschvogel work with the city to “right size” the retained job commitment and develop a new job commitment. If a plan is not submitted within 60 days, the deal “could be dissolved.”

Hirschvogel’s tax abatement deal is for 75 percent over 10 years and included expansion of the company’s facilities at 2230 S. Third St. The company had a three-year job creation window, which appears to have stretched from 2017 to 2019, during which it promised to create 30 new jobs. As of 2023, the company was in year seven of its 10-year deal and had created zero jobs. In addition, Hirschvogel promised to retain 322 jobs. It has actually retained only 284 of them. Despite being four years past the job creation window, not adding any new jobs, and in fact reducing its workforce by 38 people, the TIRC recommended this abatement deal continue. 

In the stern written warning recommended by TIRC, Hirschvogel would be told to work with the city to “right size,” that is, get a reduction in its retained jobs commitment. Why Hirschvogel needs to ask for that when the company is already getting a tax abatement for having laid off 38 people is one of those Columbus mysteries I will never understand. I guess asking nicely is supposed to make us residents feel better about the amenities we lack because Hirschvogel required a tax break. More likely, it absolves the city of the responsibility to cancel these deals when companies clearly are not going to deliver on the commitments made. 

Other notable abatements recommended to continue are those for The Gravity Project, LLC and CoverMyMeds, LLC. CoverMyMeds is currently in year four of a 100 percent, 15-year deal – one year past the three-year job creation window in which it has created 738 of a promised 1,032 net new jobs. The TIRC again recommended a sternly worded letter asking the company to work with the city on a plan to reach 1,032 jobs. The Gravity Project, LLC also had a three-year job creation window. It promised to create 50 jobs. Three years past the window, it has so far created six. It will be told it needs to create a new jobs plan to reach the 50 promised jobs.

The problem that the average Columbus resident probably doesn’t fully grasp here is that even if a company like CoverMyMeds finally reaches 1,032 new jobs created at some point in the future, this is not a “no harm no foul” situation. These abatements are sold to us as win-win agreements, because the property taxes lost are offset by income taxes from those new jobs for every year past the creation window; future property taxes once the abatements expire, and so on. 

When the companies fail to reach the job creation target during the creation window, as with CoverMyMeds, then the calculations we were sold are no longer true. And yet, every time a new deal comes down the pipe, we are told that it’s another win-win for everyone. Yay! Development! How can we be mad that our property and school taxes aren’t being collected when the math benefits us in the end? Well, it’s because so many of these deals are not enforced. The math, in fact, does not math. But our city officials rely on the fact that we aren’t accountants to sell us the same faulty product time and time again.

The TIRC recommendations this week do not contain any big surprises. These failed abatements are not any more egregious than some of the others from previous years’ reports. But Columbus residents should know this reality: Many of these deals are failures that should be rescinded. And that rather than rescind them, the Department of Development writes up a little report with recommendations from the TIRC and has City Council and the mayor sign off on the failed agreements. It would be nice if everyone could stop lying to us.