A capital spending limitation that a manufacturing company in Jackson encountered when it tried to expand operations has spurred Rep. Ted Strickland to became interested in easing bond curbs. Strickland, a Democrat from the state's sixth district, recently legislation in the House recently that would raise the capital expenditure limit on small-issue industrial development bonds to $20 million from $10 million.
The change would directly benefit Luigino's, a frozen food producer in Jackson, Strickland told a House Ways and Means select revenue measures subcommittee.
In 1990, Luigino's purchased a closed factory in Jackson, where the unemployment rate was 8.5%. Luigino's used $9.2 million in Ohio enterprise bonds to reopen the plant in January 1992. In one year, the company created 445 jobs.
A few months ago, the company decided to expand, but found the d $10 million capital expenditure limit prevented it from putting more money into the venture. The limit applies not just to the amount of the bond issue, but to any outside money invested in the project as well. Because the firm had already issued $9.2 million bonds for the project, it could only invest another $800,000, which was not enough to cover the expansion.
"This capital limitation prevented this successful company in my district from simply putting additional private capital into expanding the facility and creating new jobs," Strickland said. "Any alternative available is a convoluted and complicated one which does not make the most efficient use of capital resources."
For Strickland's bill to be effective, Congress has to renew the tax exemption for IDBs that expired June 30, 1992. The Senate and House had different plans going into the budget conference. The House would make the IDB exemption permanent and the Senate would extend it through June 30, 1994.
Strickland's bill is currently in the House Ways and Means subcommittee. If the exemption for IDBs is renewed, his bill will be included on the next tax bill that goes through the Ways and Means Committee, said Ron Sylvester, Strickland's press secretary.