|Are Businesses Milking Ohio Incentive Programs?|
By James McNair
Bellwether contributorCINCINNATI (TDB) -- In Ohio, corporations receive more than $1 billion a year in state grants, loans, tax credits and job training money with pledges to create or retain jobs. State economic development incentives are supposed to demonstrate that Ohio has a welcoming business climate and will invest public dollars to help private companies grow. The whole idea behind the tax breaks and giveways is that the economy will fatten up. Some critics call it corporate welfare. Yet the practice is engrained and has wide support. But a new audit (see complete text attached by clicking link for PDF document) from Attorney General Mike DeWine could make you wonder what kind of payoff you get for all that money.
The 44-page report, released Dec. 29, has one central finding: Of all the assistance awards that expired Dec. 31, 2010, the state can vouch for only 52.4 percent of recipients that lived up to their promise of creating or retaining a specific number of jobs. DeWine doesn’t say how many jobs were created – or how much money was received – by the class of 2010. His report only says that the Ohio Department of Development gave out $1.3 billion in new grants, loans and tax credits in fiscal 2010.
So what happened to the other 47.6 percent of ODOD trough-feeders? The outcomes were a mixed bag. Some companies simply blew it, failed to produce the jobs and never took the money. In other cases, ODOD sought “clawbacks” of some of the money or changed the terms of the award. And in quite a few cases, the state never received the required “closeout report” from the company and thus has no clue whether it met or reneged on its obligations.
For whatever reason, noncompliance was most prevalent among companies that received grants (65 percent) and loans (62 percent). Companies that received workforce training grants had noncompliance rates of 31 percent, while those receiving tax credits were noncompliant 42 percent of the time.
The four counties making up Greater Cincinnati did better than the state average in living up to their job-creation promises, as 60 percent hit the mark. DeWine’s report doesn’t name those companies, but it ID’s those that fell short. Among them:
- Hobson’s Inc. received a $270,214 grant, but failed to deliver the jobs it promised. ODOD recommended no course of action.
- Midland Co. received a $217,662 grant, but disappointed on the job front. ODOD recommended that the Ohio Tax Credit Authority reduce its rate. Ditto for Wornick Co., which received $121,830.
- Formica Corp. received a $138,689 grant, but didn’t create enough jobs. ODOD recommended that OTCA shorten the term of its award.
- An unnamed company that received a $400,000 grant to do roadwork for Union Township in Clermont County failed to create or retain jobs as promised. ODOD forgave the company and didn’t seek a refund.
"The incentives were not intended only to plump up corporate profits. The incentives, usually funded directly or indirectly by taxpayers, were given on the condition that the recipients meet performance targets. There was to be a return to taxpayers in the form of new jobs and, thus, increased tax revenue. We applaud the Ohio legislature for enacting the law requiring a transparency report on state business incentives and DeWine’s office for completing it. Now let’s hope the Department of Development and Gov. John Kasich, who has made creating jobs and running government smartly the twin pillars of his administration, will press noncompliant companies to fulfill their promises — or pay up."