State of Ohio Pursues Recovery of Incentives

Companies expanding onto brownfield sites need public incentives to make their projects viable.  However, the days when cleanup of contamination by itself could attract public incentives are long over.  Under the new local and State brownfield programs companies must make job commitments and/or improvements to the property to attract government assistance.

When companies work with State and local officials to obtain brownfield incentives they must engage in negotiations regarding what they are willing to commit to as part of the project.  These commitments will often extend 3 or more years out into the future when it becomes more challenging to predict economic and business conditions.

The Dayton Daily News discussed the State of Ohio's pursuit to recover incentives from companies that failed to meet business expansion or development commitments.  The DDN reported:

State officials reviewed 329 economic development deals that concluded in 2015 and found that all but 50 had substantially complied with the terms, such as hitting job creation and retention numbers, training workers and generating new payroll.

If companies fail to live up to their promises, the state may demand repayment or make other changes to the deal. In the 50 cases where targets weren’t hit, the state is moving to clawback a collective $776,000. Some of the biggest take backs are being launched against well-known, big companies — Proctor & Gamble Co., U.S. Steel Corp., and The Dannon Co. — for failing to create or retain promised jobs

This is very relevant to JobsOhio brownfield grants and loans provided to companies to assist with sampling or cleanup at contaminated properties.  The grant agreements for the JobsOhio Revitalization Program include contractual commitments to increase payroll, add jobs or make capital investments to expand the business.  For example, at minimum, JobsOhio typically requires 20 new jobs over a three year period to compete for brownfield cleanup grant funding under its Revitalization Program.

The grant agreement language is somewhat vague as to what happens if the grant commitments are not met by the company.  The language does allow for companies to assert that changing economic conditions resulted in unmet commitments.  However, the contract language does leave open the possibility JobsOhio could request return of the entire brownfield grant provided.

It is important that companies pursuing brownfield incentives be aware of the consequences of not meeting commitments.  It is also important to avoid putting forward unrealistic job or capital investment commitments just to attract upfront grant money.  Companies that over commit open themselves up to clawback by the State of the funds provided as well as publicly being outed for failing to live up to their commitments.

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