Look What You Can’t Get Away With Anymore: A Case Study on Economic Development Incentives

But the deal was approved with no opportunity for public vetting, and even now Mason leaders either can’t or won’t answer this key question: How much will new P&G employees net the city in income taxes? Without knowing the answer to that question we don’t know how long it will be before the income offsets the benefits Mason is giving P&G.

Economic packages are the the cost of attracting new development in the current global business climate – but communities must go into them with all of the facts, and it’s not at all clear that Mason did.

–“Questions remain on Mason incentives” From the Editorial Board, Cincinnati Enquirer (http://www.cincinnati.com/story/opinion/editorials/2015/03/19/questions-still-unanswered-incentives/25013003/)

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I debated hard about whether to write about this one.

I have two problems:  First, the town in this story is close to where I live, and I know some of the city staff members.  Second, my husband is with P&G.  He has worked at this facility in the past and will probably work there again in the future.  And I will be the first to say, from long personal experience, that this company does a consistently better job of corporate citizenship that almost any multinational company you will encounter.

But.  There’s a crucial cautionary tale here, and it’s one that neither you nor your electeds can afford to ignore.

First, note the level of scrutiny being given to the deal by the newspaper, and coming from no less than its Editorial Board.  From where I sit, an editorial from this historically conservative publication criticizing a local incentive deal is unusual enough.  To give that attention to an incentive deal in a suburban community is even stranger (if you know Greater Cincinnati, you know that Mason is an major suburb, but it’s still a suburb).  Like most old-line newspapers, the Enquirer usually focuses on the center city and pays relatively less attention to the suburbs.  On top of that, this paper has been historically sympathetic to most of Greater Cincinnati’s big businesses, including P&G.

I think it’s an important indicator of how the general public (and press) perception of incentives is changing. Prior to 2008, when this surburb was the hot spot of the fastest-growing county in Ohio, when revenues for places like this seemed destined for long-term growth, I doubt anyone at the Enquirer or anywhere else would have given this deal a whole lot of thought.  Certainly not enough to schedule a phone conference with the editorial staff.  But even though Mason’s overall desirability in the region is still extremely high, a broad zeitgeist of strained budgets and future budget uncertainty has shifted general attention more intensively onto a spot that would have sat largely in the shadows a few years ago.

If a historically conservative masthead is raking a suburban community over the coals for an incentives deal involving one of the region’s favorite corporate citizens, what’s the likelihood that your incentive deal will sneak past your professional media — or the amateur muck-rakers in your town who have much more of an axe to grind and might have fewer professional qualms about laying into you?  Our incentive deals were maybe not newsworthy when we were all flush with money, but now the kleig light has been turned squarely on us.  You might survive the scrutiny, but you’re probably going to take some bullets in the process.

Second, note what happens when the mayor tries to work around the information that he does not have.  Although his points are probably reasonable assumptions with regard to the spin-off impacts from moving a lot of high paying jobs to this facility, he has nothing to go off of except his assumptions.  And not surprisingly, it doesn’t go well.

Developing relatively solid, numerical estimates of the costs and benefits of a deal like this isn’t rocket science. You don’t need an economics professor or a REMI model or a consulting budget that requires a bonding issue.  You can probably do a reasonably good job with a pen and paper and a high school diploma.  In fact, that’s probably a better approach than the usual black box impact study because you and everyone looking at it can understand what you’re doing.  But regardless, you cannot get away anymore with not doing the math.

If this is new territory for you, check out Elaine Harpel’s Smart Incentives for a good grounding and sound policy and process guidance.  You can also take a look here and here for my take on incentives, which is also in the Local Economy Revolution book.

I wish Mason well, and I hope that they can use this as a catalyst to help their bright minds prepare for scrutiny next time.  But this should set off some warning bells for all of you:

Do the math and be prepared to talk about it.  Because you will probably have to.
Oh, and if anyone knows how I can make sure that my husband ends up in an office where his cell phone actually gets reception after he moves there, would you let me know?

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