The Butler County Port Authority Board approved a sales tax incentive worth as much at $3.4 million for Koch Foods in Fairfield recently saying hundreds of jobs trump a federal indictment the company is facing.
Koch Foods is the county’s 12th largest employer and plans to grow its employee count by 400 throughout three years with a project that will add a 400,000-square-foot facility at the campus on Port Union Road.
The company is making a $220 million investment in the community including construction and machinery. The port authority board will facilitate a sales tax exemption on construction materials which could be worth up to $3.4 million to Koch, according to Butler County Development Director David Fehr. The Port Board will collect a fee of $425,000 for its services.
Under Ohio law, port authorities can own, finance, construct and lease real estate including land, buildings and equipment. A port authority that buys or owns property for an expanding business, construction materials and other construction costs are tax-exempt. Also, ports can issue taxable and tax-exempt bonds, offering borrowers longer-term, fixed-rate financing than the terms of a commercial loan.
Normally when the port board discusses backing projects it discusses the financial impact a given project will have on the county’s economy, but this time talk turned to the fact that Koch is under a federal indictment for alleged price fixing.
“The tough part for us is it’s an indictment. They’ve not been found guilty, but unfortunately the company has a timing issue,” Fehr said. “We’d love for this to get resolved in the court. Then we could just set that aside. But that’s not the case.”
The Port’s attorney, John Reister, has studied the issue.
“The company did vigorously deny criminal activity,” Reister said. “From a legal point of view there is no law that we’ve been able to find that says a board such as the port authority is prohibited from making a loan to a company that is under indictment.”
Fairfield and the state of Ohio have also invested heavily in this project. The city approved a 10-year 75 percent property tax exemption and has agreed to make improvements to the water and sewer system to accommodate the expanded development.
Based on a Koch promise to bring in $14.8 million in new payroll, JobsOhio contributed $1.68 million in grants and hiring help. Fehr said Fairfield’s attorneys and lawyers for JobsOhio in the state’s economic development office vetted the issue and proceeded with their incentives.
Reister told the board they were looking at the “optics” of the indictment, “which is not a conviction,” versus the port board’s mission.
“The optics is really two-sided, right,” Port Board President Denise Quinn said. “There’s the optics of the indictment and then there’s optics of the potential of 200 (in the first year) more people having a job.”
The board went into a brief executive session and returned to approve the incentive. Board member Robert Schmidt abstained.
Prior to voting in favor, member Matt Bockhorst explained his decision.
“I definitely believe local communities are in the best position to identify projects that they want to support and they want to have in the community,” Bockhorst said, noting that the company is vigorously denying the allegations, which coupled with Fairfield’s support won his favorable vote.