Mayor’s veto forces Council showdownWritten by Justin R. Kalmes | | firstname.lastname@example.org
Seven cents an hour was enough to force a political showdown between Toledo Mayor Carty Finkbeiner and Toledo City Council.
In question was whether Toledo’s living wage ordinance should be waived for the proposed Costco store in the Westgate Village Shopping Center. Council thought so April 13 when it voted 8-2 for a waiver of the law, which affects companies with more than 49 employees that receive public money. Finkbeiner vowed to veto the move because he felt incentives offered to the project were too generous, and he made good on that promise April 23.
Liz Holland, chief executive officer of the Chicago firm that owns Westgate, said requests of the city have not been unreasonable when comparing them to incentive packages it has offered other companies in the past. She described the wage ordinance as a certain deal-breaker if a waiver was denied.
”They are a national company with a national starting salary policy,” Holland said. ”They are not going to change their starting salary policy for the City of Toledo.”
Toledo’s living wage ordinance requires companies to pay employees no less than $10.57 an hour with benefits starting after 60 days. Costco’s entry-level employees earn between $10 and $10.50 an hour with benefits beginning after 90 days.
Incentives ‘hard to justify’
As part of its deal with the city, Westgate requested and was granted a 15-year abatement that allows it to pay 50 percent of the real property taxes on the assessed value of the ”brownfield” site, before remediation, that Costco will sit on. According to a document provided by Andy Ferrara, the city’s manager of real estate, Westgate pays $343,179 in total taxes on real property each year. The term would save it $2.57 million during 15 years.
The second part of the agreement would allow Westgate a 100-percent abatement of the real property taxes on the increased assessed value after remediation and redevelopment of the Costco site for 15 years. Under a normal enterprise zone abatement, Ferrara said, Westgate would be responsible for paying 45 percent of its real property taxes to the Washington Local School District. But because the project met stipulations of a state statute created as an incentive for brownfield remediation, the city was responsible for reimbursing the school system for tax dollars lost in the abatement. A total payment of $300,000 to be paid over a five-year period was agreed upon by the city and Washington district.
During an April 19 meeting with Toledo Free Press, Finkbeiner compared the Costco deal with his first administration’s deal to bring a Wal-Mart location to Glendale Avenue. He said Wal-Mart paid for its own brownfield cleanup and street improvements, and
received no tax abatement.
In an April 23 letter to Rob Ludeman, city council president, Finkbeiner said incentives offered to Westgate would cost the community $7.2 million for the 15 years of the agreement. Ferrara said the tax abatement was ”groundbreaking” because retail outlets typically don’t receive such incentives.
”I just don’t see them being the kind of stabilizer to the economy that we would give that incentive to,” Ferrara said. ”How much do
you have to give?” he said. ”When you give
$7 million over 15 years, what is 7 cents an hour? That’s hard to justify.”
Holland and several city council members said they felt a 7-cent difference wasn’t worth jeopardizing about 200 well-paying jobs that would be brought to Toledo should the project become reality.
”I believe that when you take into consideration not only the hourly rate, but include the benefit package, that is extremely generous,” said Councilman George Sarantou, who voted in favor of the wage waiver and said he expected to do so again.
Because Costco pays 94.5 percent of employee health-care costs, Sarantou said, the hourly compensation for entry-level workers would likely be $1 to $2 an hour higher than the $10 or $10.50 base rate.
”I think we need to take that into consideration,” he said.
Councilwoman Ellen Grachek, whose district includes Westgate, said she supports paying workers a living wage, but the city’s ordinance does not account for an employer health-care contribution the size of Costco’s.
”We’re learning through this Costco Westgate issue that our living wage law is handcuffing us in this instance,” Grachek said.
Ferrara questioned how much Costco would benefit the local economy. He said shops in the Westgate complex could receive an economic boost as result of the development, but he doubted it would generate new spending.
”The pie in Toledo is only so big for the retail market. Costco only absorbs pieces of the pie,” Ferrara said. ”They’re not making the pie any bigger.”
Holland responded by saying she estimates the city will collect close to $320,000 in nine months on income taxes generated from construction jobs for the project. She said there are already 1,000 Costco members living in the Toledo area who spend an average of $200 per trip, 10 times a year at its Michigan locations.
”We think that we will be able to retain those sales,” Holland said. ”At a minimum, the retail sales pie will expand by $2 million the day Costco opens.
”I don’t believe what we have requested is outside what we are going to be contributing back,” she said. ”Not even close.”
‘Disrespect’ to process
Finkbeiner, in response to the April 23 veto, wrote to Ludeman and other council members he reached his decision because the city ”cannot afford to repeat the Costco package of incentives ever again.”
Ludeman said Finkbeiner showed ”disrespect” to the veto process because he waited so long to make his decision. He said Finkbeiner and John Madigan, the city’s acting law director, agreed on a 4:45 p.m. April 23 deadline. Ludeman said the veto wasn’t delivered until about 11 p.m. that night to One Government Center.
”I don’t know what difference the five hours made in the decision-making process,” Ludeman said. ”That shows a flaw in the way it was handled by the mayor and his administration.”
Sarantou and Ludeman said they were confident council would be able to secure the necessary nine votes to overturn the veto when it addressed the matter April 25. The mayor’s actions, Ludeman said, were cause for council members to unite.
”Because of that tactic, council should stand firm together and stand up for ourselves,” Ludeman said.
Councilman Phillip Copeland, who along with Bob McCloskey failed to attend the meeting at which the wage waiver was passed, said April 24 he was unsure if he would vote to overturn Finkbeiner’s veto. He said he would consider several factors before reaching a conclusion.
”Costco is a very good company,” Copeland said. ”They pay good fringe [benefits]. They’re probably one of the best for a company like that. You can’t overlook that.”