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Finley's
OHIO MUNICIPAL
Price D. Finley, Esq., Editor-in-Chief
Improving Communities With
Community Improvement Corporations
By Price D. Finley, Esq. and Emmett M. Kelly, Esq.
Bricker & Eckler, Ll.P'
Many communities utilize non-profit corporations
to facilitate activities that a city or village could not
directly accomplish. Often these special corporations
come in the form of chambers of commerce or business
groups like community development corporations.
Ohio law provides for the creation of a "community
improvement corporation" as a more formal
organization that can encourage and facilitate
economic development.
Chapter 1724 of the Ohio Revised Code permits a
municipality, county or township (the "political
subdivision") to cause the creation of a non-profit
corporation called a community improvement
corporation ("CrC") "for the sole purpose of advancing,
encouraging, and promoting the industrial, economic,
commercial, and civic development of a community
or area."? At its essence, a CIC is an Ohio nonprofit
corporation created in the same manner as a charitable,
arts, or other corporation formed "otherwise than for
the pecuniary gain or profit of, and whose net earnings
or any part of them is not distributable to, its members,
directors, officers, or other private persons, except that
the payment of reasonable compensation for services
rendered and the distribution of assets on dissolution
as permitted by Section 1702.49, of the Revised Code
is not pecuniary gain or profit or distribution of
net earnings .":'
In fact, all of the laws that apply to nonprofit
corporations generally also apply to CICs, unless such
laws are inconsistent with Chapter 1724 of the Ohio
May/June 2006
Volume 18 • Issue 3
Revised Code." As a corporation separate from a
municipality, a crc may assume certain community-
building activities that would be difficult, either legally
or politically, for the municipality itself to directly
undertake. What really makes a CIC unique from a
basic nonprofit corporation is the ability of a political
subdivision to designate a eIC as its "agency" age11cy
for the industrial, commercial, distribution, and
research development in such political subdivision."
This designation (in addition to certain agreements
between the political subdivision and the CIC, as
discussed in more detail below) enables a CIC to
exercise certain superpowers on behalf of the political
subdivision for economic development; powers that
the political subdivision would not be able to directly
exercise without jumping through cumbersome and
potentially problematic procedural hoops.
A CIC may be designated by the political subdivision as
its agency to promote industrial, economic, commercial,
and civic development. Such designation may allow a
political subdivision to use the CIC for development
purposes in a less restrictive process than that of the
political subdivision. This designation is accomplished
by legislation of the governing body of the political
subdivision determining that the policy of the political
subdivision is to promote the health, safety, morais,
and general welfare of its inhabitants through the
designation of a CIC as such agency. Through such
designation and through an agreement between the CIC
and the political subdivision, a crc can have a positive
impact on the development within and of the
community.
The agreement between CIC and the political
subdivision may allow the CIC to undertake one or
more of the following activities for the benefit of the
political subdivision and the community:
(1) development of an economic development plan
for the political subdivision, which plan must be
approved by the governing body of the political
subdivision."
(2) sale or lease of lands, at an agreed-upon price,
owned by the political subdivision and not to be
required for its purposes, for uses determined by
the governing body as those that will promote
the welfare of the people of the political
subdivision, stabilize the economy, provide
employment, and assist in the development of
industrial, commercial, distribution, and
research activities to the benefit of the people of
the political subdivision and will provide
additional opportunities for their gainful
employment and without advertising or receipt
of bids:" and
(3) conveyance of lands of the political subdivision
to the CIC without competitive bidding."
At least 40% of the members of the board of trustees
of the CIC must be comprised of appointed or elected
officers of the political subdivisions that have
designated the CIC as its agency. If more than one
political subdivision has designated the same CIC
as its agency, at least one officer from each political
subdivision shall be a member of the board of
trustees."
Once created, a CIC can help facilitate economic
development for the political subdivision primarily
in the area of property acquisition, disposal and
development. For instance, a political subdivision
may acquire real and personal property in connection
with industrial and economic development and sell or
lease such property to the CIC without competitive
bidding." The CIC would then have the power to sell
such property without competitive bidding. One
restriction on the CIC in this regard is that, if the CIC
sells such property for an amount greater than the
amount it paid the political subdivision for such
property, the CIC must pay the difference to the
political subdivision,11
Nathan V.Green, the Economic Development Director
for the Circleville-Pickaway CIC, has found that CICs
"provide a great vehicle for communities to bring
the public and private sectors together to promote
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development of the local economy. Unlike
governmental entities such as cities, counties and port
authorities, CICs are typically funded through a mix of
private and public donations. This allows communities
greater flexibility when it comes to marketing and
project generation. CICs allow staff some cover in
dealing with business that is not always possible when
reporting directly to elected officials. Additionally, the
ability of CICs to own land and buildings and to issue
industrial revenue bonds gives communities more tools
to attract and retain business."
Successful uses of CICs in Ohio are abundant. One such
example is the Village of Groveport's CIC, which is
designated agency of the Village of Groveport for the
purpose of development. Jeff Green, the Economic
Development Director for the Village of Groveport and
previously the Director for the Cambridge-Guernsey
County CIC, has had much success with using
Groveport's CIC for acquisition and development
purposes. "The Groveport Community Improvement
Corporation has been instrumental in Groveport's
downtown development acting much like a downtown
development corporation," stated Mr. Green.
"Groveport's CIC has helped the Village acquire
property and demolish existing structures to make
way for redevelopment projects, including commercial,
mixed use developments and even a medical building
development." Mr. Green also has found that the
process that the CIC uses to acquire, sell and prepare
property for development is a "more efficient process
than having to meet all requirements that the Village
would have to endure, such as public sale requirements,
to get these projects moving forward."
According to Norm Blanchard, the Executive Economic
Director, the Cambridge-Guernsey County CIC
provides a "valuable monthly forum for community
leaders." Such a forum helps keep all the community
leaders informed of any business activity and helps
strengthen relations and bonds throughout the
community. Mr. Blanchard further explains that the
Cambridge-Guernsey County CIC has been used as a
toll to "seek and retain jobs", which has "resulted in
the purchase and upgrade of local rail systems,
purchase and re-sale of development property, and the
development of marketing programs designed to
attract industry. Workil1g with local officials, the
[Cambridge-Guernsey County] CIC was the proponent
agency in generating millions of dollars of development,
and over 300 jobs in last year alone."
A Cle's successful results require that the CIC be
successful and proper operated. A CIC which has been
designated as the agency of the political subdivision is
required to comply with Ohio's public records laws
and open meeting or "sunshine" laws in the conduct
of its meetings, with certain exceptions discussed
below. In addition, according to an opinion of the Ohio
Attorney General, the political subdivision would
be required to provide for a defense for and to hold
harmless members of the governing board of the CIC,
which has been designated as the agency of the
political subdivision."
As discussed above, certain exceptions to Ohio's public
records laws apply to CICs. One such exception
applies to any financial and proprietary information,
including trade secrets, submitted by or on behalf of
an entity to the CIC in connection with the relocation,
location, expansion, improvement, or preservation of
the business of that entity held or kept by the CIC,
or by any political subdivision for which the CIC is
acting as agent, is confidential information and is not
a public record. Any other information submitted by
or on behalf of an entity to the CIC in this context is
confidential information and is not a public record
until the entity commits in writing to proceed with
the relocation, location, expansion, improvement, or
preservation of its business. When the board of
trustees of a CIC, or any committee or subcommittee of
the board, meets to consider information that is not a
public record, the board, committee, or subcommittee,
by unanimous vote of all members present, may close
the meeting during consideration of the confidential
information. The board, committee, or subcommittee
is not permitted to consider any other information
during the closed session. Any meeting at which a
decision or determination of the board is made in
connection with the relocation, location, expansion,
improvement, or preservation of the business of the
entity must be open to the public."
If a CIC relieves the burdens of government for the
political subdivision and otherwise serves a charitable
purpose, the CIC may be designated as a 501(c)(3)
organization under the Internal Revenue Code. If so
designated, donations made to the CIC may be tax
deductible."
Besides the benefit of diverse development, CICs
can also serve as a forum for governmental and
community leaders to discuss the community's
development opportunities and development plans.
Creating the mechanism for such a forum may be the
most positive benefit to the community.
Although a municipality has some control over a CIC
through (1) its power to appoint at least 40% of the
members of the board of trustees, IS and (2) its ability to
designate a CIC as its agency and, if necessary, to
withdraw such designation and cause a new CIC to
be formed, a municipality contemplating the creation
of a CIC should carefully consider the structure of the
board of trustees and the members that are appointed
to the board of trustees in order to avoid having to
take dramatic steps to fix a CIC that has become
comprised of board members who don't share the
same vision as the municipality as to the CIC's role
in economic development activities.
As with other economic development tools, a CIC
cannot be expected to solve all of the issues of a
community struggling to strengthen its economic
development programs. However, if structured
properly, a CIC can serve a critical role in helping a
municipality to accomplish its economic goals and
objectives and to coordinate its development
activities .•:.
Endnotes:
1Price Finley is the Vice-Chair of Bricker & Eckler's Public
Sector Group and focuses his practice on public finance
and economic development. Price is also the Editor-in-
Chief of Ohio Municipal Service. Emmett Kelly is an
associate in Bricker & Eckler's Public Sector Group and
has significant experience in municipal and economic
development finance.
2 R.C. 1724.01.
3 R.C. 1702.01(C).
4 R.C. 1724.08.
5 R.C. 1724.10.
6 R.C. 1724.10(A).
7 R.C. 1724.10(B).
8 R.C. 1724.10(C).
9 R.C. 1724.10(A).
10 R.C. 761.02.
11 R.C. 1724.10(C).
120AG No. 87-024.
13 R.C. 1724.11.
14 Any individual or corporation considering a donation to a
CIC would need to consult with their own tax advisor to
determine whether such contribution would be tax
deductible.
15 It would be advisable for a CIC to have less than 500/0of
the board comprised of board members that are officers
or elected officials of one municipality in order to avoid a
characterization that the CIC is under the control" of that
II
municipality.
Reprinted from Finley's Ohio Municipal Service,
May/June 2006, with the permission of the
publisher and copyright owner, West Group.