By Gregory Korte
The Cincinnati Enquirer

City Council members Y. Laketa Cole and David Pepper talk about postponement of the Convergys decision (Gary Landers photo) | ZOOM |

When Convergys Corp. CEO James Orr showed up at City Hall - unannounced and in person - six hours before Cincinnati City Council was to vote Tuesday on an unprecedented package of $63.4 million in tax incentives for the company, it was clear the deal was in trouble.

Orr came to City Hall empty-handed. Three hours later, he left - again empty-handed.

The chief executive had been nearly invisible during the weeklong debate leading up to Tuesday's scheduled vote. So his appearance at the office of David Pepper - the deal's most vocal critic - signaled a turning point.

Pepper was still at his Mount Adams home when Orr showed up. By the time he got downtown, Orr was on the defensive.

Mayor Charlie Luken waits in his office Tuesday as the Convergys deal unravels. (Michael E. Keating photo) | ZOOM |

Take all the time you need, Orr told Pepper.

Two hours later, Mayor Charlie Luken canceled the special session of City Council he had called a week ago.

"Everybody felt it was worth taking a breather and seeing if it could be repackaged, rather than putting forward something that could not pass," Luken reported later.

The sudden timeout puts the biggest tax incentive deal in the city's history on hold for at least a week, continuing the uncertainty about whether the customer service and billing firm will remain downtown or move to Northern Kentucky.

The company had previously told city officials it had a deadline of Tuesday to make a decision, because its option to buy the Atrium One building at 401 E. Fourth St. expired at the end of the day.

"We're attempting to extend it so we have a little more time to finalize an agreement with the city," a Convergys spokeswoman said Tuesday afternoon.

No date has been set for a new council meeting. City Council, which is in summer recess, doesn't hold a regular meeting until Aug. 6.

CONVERGYS COVERAGE

SUNDAY: • Convergys: Council agonizes over take-it-or-leave-it deal • You're more familiar with Convergys than you think • Convergys could displace 5 companies MONDAY: • Norwood fumes at incentives • Convergys first to use new extended tax break law • Amos: City's Convergys deal gives too much, gets too little TUESDAY: • Close call on Convergys • Taxpayers want a bit of help, too • Convergys deal: Vote today (Editorial) TODAY: • Convergys deal on hold • Costs pushing company • Redoing the deal (Editorial)

CITY PROPOSAL

Click here to read the city's 8-page proposal to keep Convergys downtown. Acrobat PDF file (124k).

Luken said he would probably call another special meeting next week in hopes that council will vote on its biggest economic development deal since the 1998 decision to approve construction of Paul Brown Stadium.

"At least as of today, Convergys' position is that they don't care how we get there, as long as it's the same amount of money," Luken said at a news conference. "We're not going to accept that. We're going to drive the hardest bargain we can for the taxpayers."

Tax credits derailed deal

Seven council members joined Luken, but even those who supported the deal seemed happy to have more time. All said they wanted to keep Convergys downtown. Most said their biggest problem was with the $33 million in job retention tax credits, which give Convergys a direct subsidy through rebates of city earnings taxes paid by the company's existing employees.

The city's package - in addition to $144.2 million in similar tax credits, grants and loans from the state of Ohio - was an attempt to match a similar offer by Kentucky, which has been trying to lure the company for almost two years.

Convergys has never given specific details of Kentucky's proposal, but said Tuesday that it was "comparable" to the combined Cincinnati and Ohio packages.

"I think Convergys wants to stay downtown. I think it's a preference of the people who run that company that they would prefer to remain a part of the lifeblood of the city," Luken said.

Without a meeting Tuesday, City Council could give no formal direction to the city manager about how to proceed with the negotiations. But the mayor's public statements - and a draft resolution by Pepper - set forth these guidelines:

• The deal must not include job retention tax credits, though there are no restrictions on job creation tax credits.

• The city should be willing to increase the cash grants to the project, now at $8 million.

• Convergys' promises to create jobs and invest in the Atrium One building should be legally enforceable.

The biggest challenge will be to put together a new deal still worth $63.4 million over 15 years, but without the job retention tax credits, which make up more than half of the deal.

It was those tax credits that were the most troubling for many council members, including Councilman Chris Monzel, who had been generally supportive of Convergys until Tuesday.

"Looking at the whole deal, there was always something nagging me about this," Monzel said. "It was the job retention tax credits that didn't sit right. It's bad public policy."

Monzel called Luken the first thing Tuesday morning. He didn't want the mayor to be surprised, he said. Monzel was voting no.

"I didn't want to go in there and see it go down. I'm not going to play politics on this. It's too important," Monzel said.

CEOs, taxpayers lobby city

A who's who of Cincinnati's corporate boardrooms, including Cincinnati Reds owner Carl Lindner and Fifth Third Bank chairman George A. Schaefer Jr., had lobbied Monzel and other council members.

But momentum had been shifting against the deal since the weekend, when council members campaigning on the church festival circuit heard from neighborhood leaders and taxpayers opposed to the deal. Reports of Norwood's unhappiness over Convergys' broken promises to create jobs there in exchange for another tax break also weighed on some council members.

With four other council members already publicly opposed, Luken couldn't get the votes needed for passage.

Luken said he would not call for a vote if he was uncertain of its outcome.

"We had undecideds. We had yes votes turning into no votes. We had no votes turning into yes votes," Luken said after meeting with Orr and Convergys lobbyist William H. Hawkins II.

Orr left that meeting shortly after noon with a broad smile, but he remained tight-lipped.

Later, the company issued a statement: "Convergys has continued to have discussions with the city including some restructuring of our proposal in order to stay downtown. We believe we are close to finalizing an agreement that will be good for Convergys, the city and the state. It is in the best interest of everyone to continue working in order to finalize the details of the agreement."

Convergys spokeswoman Renea Morris gave a shorter assessment: "We're almost back to square one, but not quite."

E-mail gkorte@enquirer.com

Video from WCPO