The Promise of Youngstown's Tax Incentives Waits for the Payoff from Chill-Can
Perhaps no city in the midwest is more emblematic of Rust Belt identity than Youngstown. A steel boomtown in the first half of the 20th century, things went bust in the second half. One-by-one, steel mills facing fierce foreign competition shut down. Unemployment spiked, residents fled the city.
In the aftermath, city officials came up with a plan to attract new business, offering a range of incentives including free land, tax abatements, grants, low interest loans and more. However the track record shows that more often than not, the city was coming away with little to show for its incentives. One project from the last five years symbolizes the failed promise. ProPublica teamed up with the Youngstown Business Journal to take a closer look. Dan O’Brien from the Business Journal has this story on Chill-Can.
On an unseasonably warm November morning in 2016, Youngstown’s business and political leaders crowded onto a small, scraggly plot of land on the city’s East Side to celebrate the groundbreaking of a new venture: Chill-Can.
That story lead the newscast that evening on Youngstown’s WKBN 27 First News. Mitchell Joseph and his company pledged to build a $20 million production facility, creating hundreds of new jobs in the process. The motto of his California-based company: “The Ice Age Is Over!”
“What we’re about to do here in Youngstown cannot be reproduced in China, in Japan, Korea or anywhere in the world,” Joseph said.
“So when I pop the can and it chills, we own 31 United States patents and over 400 global patents. There is absolutely no way to go around us.”
The first self-chilling beverage can
Chill-Can is billed as the world’s first self-chilling beverage can. To assist the company in setting up operations in Youngstown, the city gave it a $1.5 million grant, massive tax breaks and spent $360,000 acquiring properties and demolishing homes to make way for the project. More than three years later, Youngstown is still waiting for the first of these high-tech cans to come off the production line.
A pair of metal buildings that look like airplane hangars sit empty on the site.
Piles of stacked framing, covered in protective plastic, rest on an abandoned road that cuts through the unfinished campus.
According to the company’s most recent report to the city, not one job has been created.
That report on WKBN 27 First News was from March 21st of last year.
Not much has changed since then.
The latest in a long long of fizzled developments
The deal for Chill-Can is just the latest in a long line of fizzled developments. It underscores how officials have gambled with economic development dollars in hopes of reviving the city. The efforts relied heavily on the state of Ohio’s enterprise zone program, which allows distressed communities to offer property tax breaks, usually over 10 years. In exchange, a company agrees to create a specific number of jobs and invest a certain amount of money into the business. Once the 10-year term expires, the business begins to pay its full tax liability.
Between 1991 and 2017, the city awarded millions of dollars in property tax breaks to 94 projects. Those projects all promised new jobs, according to data provided by the city. An investigation by the Business Journal and ProPublica finds that half of those projects failed to live up to their promises, a quarter created no new net jobs. Youngstown provided cost projections for just 30 of the 94 agreements. It says it couldn’t locate many of the early contracts. For the deals with documentation, officials estimated awarding more than $15.5 million in tax breaks.
First Ward Councilman Julius Oliver represents the East Side neighborhood where Chill-Can is located. Oliver describes Youngstown’s incentives system as “broken”, and he’s calling for accountability.
“At this point it looks like another project that had promise. The city was taken advantage of with that promise and now we are where we are, which is with nothing, no jobs,” Oliver said.
“I still think it could be a great thing, it’s just taking way too long to continue to be that optimistic about it.”
A financial toll
All of this has taken a financial toll on Youngstown, especially its struggling public schools, which get about a fifth of their funding from property taxes. The district is under state control, and the schools are rated as some of the worst in Ohio. The city says the district’s woes have nothing to do with its use of corporate tax breaks. But critics like school board member Jacqueline Adair say they’ve deprived the schools of resources.
“These companies in my opinion have come to realize we can zero in on these cities communities, which are desperate for new business and they give us, almost give away the store in terms of these tax abatements and they give nothing back. Nothing back!” Adair said.
“Not in terms of jobs or most importantly as a school board member, property tax money.”
Youngstown’s approach to economic development is coming under greater scrutiny from outside the city. By 2015, the city’s declining tax base meant it had limited resources in the general fund to support economic development projects. When Mitchell Joseph sought incentives to bring Chill-Can to Youngstown, officials decided to dip into revenue from the city’s water and wastewater departments. Ohio auditor, Keith Faber blasted the city for doing so and directed the city to repay nearly $4.5 million — including the $1.5 million in incentives that went to the Chill-Can project.
Youngstown’s current mayor, Jamael Tito Brown, challenged the auditor’s findings and said the city would not comply without a court order.
Repaying the total amount could force Youngstown into a budget crisis.
As questions have come up about the project’s future, Joseph has taken measures to reassure the city. Two years ago, he delivered three test cans to the newsroom at WKBN where anchorman Stan Boney showed off what the station boasted as the “first demonstration” of the product.
That was in May of 2018.
Last fall, during a Cleveland Browns preseason game, the company aired an ad.
The spot closes with a pledge: “Chill-Can... Coming Soon. Youngstown, Ohio.”
Officials are still waiting.
A far more complex project
For his part, Joseph acknowledges that the Chill-Can campus became a far more complex project than he originally envisioned and admits he should have performed more due diligence at the site. Among the challenges, antiquated utility lines that needed replacement. He calls it, “a nightmare.”
Joseph did take out a full-page ad earlier this year in the Warren Tribune Chronicle, reassuring Youngstown that the Chill-Can was coming, despite the coronavirus pandemic. “Please know I am fully committed,” he wrote, “and look forward to the coming years of growth and prosperity.”
Dan O’Brien’s story for WKSU was edited by Andrew Meyer and produced by Jon Nungesser. You can find his full story here.