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 (“CIC”) “for the sole purpose of advancing, encouraging, and promoting the industrial, economic, commercial, and civic development of a community or area”1. 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”2.

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 Revised Code3. As a corporation separate from a municipality, a CIC may assume certain communitybuilding 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 CIC as its “agency” agency for the industrial, commercial, distribution, and research development in such political subdivision4. 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, morals, 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 CIC 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 subdivision5;

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 bids6; and

3. conveyance of lands of the political subdivision to the CIC without competitive bidding7.

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 trustees8.

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 bidding9. 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 subdivision10.

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 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. Working 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 CIC’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 subdivision11.

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 public12.

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 deductible13.

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 trustees14, 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.

Footnotes

1. R.C. 1724.01.

2. R.C. 1702.01(C).

3. R.C. 1724.08.

4. R.C. 1724.10.

5. R.C. 1724.10(A).

6. R.C. 1724.10(B).

7. R.C. 1724.10(C).

8. R.C. 1724.10(A).

9. R.C. 761.02.

10. R.C. 1724.10(C).

11. OAG No. 87-024.

12. R.C. 1724.11.

13. 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.

14. It would be advisable for a CIC to have less than 50% of 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 municipality.

Reprinted from Finley’s Ohio Municipal Service, with the permission of the publisher and copyright owner, West Group.