Sunday, July 20, 2003

How city can cope

We asked experts from the Greater Cincinnati Chamber of Commerce a series of questions on how the city can attract and keep corporate citizens. Here are their responses:

Q. Did the city's 15-year offer of earning's tax credits for Convergys' current Cincinnati jobs set a risky precedent? If so, what should the city do next time?

A. You can't predict the future for complex economic development deals - no two are alike. It is perhaps the most difficult choice a local elected official has to make - risk losing part of something v. keeping all of nothing.

It is important to remember that Cincinnati "makes money" from earning's taxes, even from "discounted" earning's taxes. In a competitive deal, if the city thinks it may lose those jobs and that it can keep those jobs by returning of portion of earning's tax collected for a limited period of time, such incentives should be considered.

The real precedent here is that Cincinnati appears willing to invest in a company that presents our region with a unique opportunity. Convergys is a world-leader in one of the fastest-growing, most competitive industry sectors in the world - information technology services. In the next ten years, the State of Ohio, through the Third Frontier project, will invest $1.6 billion to grow and attract companies just like Convergys.

Johnathan Holifield, Vice President, Greater Cincinnati Chamber of Commerce, Executive Director, CincyTechUSA

Q. Are there things that can be done to relieve Cincinnati of corporate demands for ever-higher multi-million-dollar incentives to stay or expand here?

A. To compete successfully in a global economy, the most important thing Cincinnati can do to reduce corporate demands for incentives is to create a cost-efficient, stimulating environment where businesses and their employees want to be. Under the Mayor's and Council's charge, and with the leadership of George Schaefer and Valerie Lemmie and the Economic Development Task Force, big strides have been taken in this direction.

Michael Fisher, President, Greater Cincinnati Chamber of Commerce

Q. Are there things that can be done to rescue the city from costly bidding wars with Kentucky or other neighbor states over Cincinnati-based companies?

A. Intra-region business relocations are the exception. Within most states, including our three, the use of public incentives for such deals are limited and often severely restricted. In regional economies, states generally do not "raid" neighboring states. This can change, though, when a company seeks new ways to manage costs in an increasingly competitive environment.

Our region collaborates well in its efforts to attract new companies. Just last year, Site Selection magazine ranked Cincinnati USA among the top 10 in three categories of the top 50 metro areas in the U.S. for new business investment and expansion. New initiatives in transportation and land-use planning speak to growing awareness of our regional economy. Convention and tourism promoters collaborate regularly. Progress is substantial and too often unrecognized.

Nicholas J. Vehr, Vice President, Economic Development, Greater Cincinnati Chamber of Commerce

Q. Should detailed cost benefit impact studies be done before the city offers big incentive packages? What direct and indirect benefits should be measured?

A. Due diligence is an important part of any investment decision, whether public or private. The particular "value" of any deal depends upon many variables (cost of land, labor and materials, cost of capital, jobs retained, jobs created, workforce availability, supplier accessibility, and many more). There is no clear answer to what should always be measured because each business and each deal is unique.

Nicholas J. Vehr

Q. Would you favor the city adopting caps on incentive dollars per job in such deals?

A. No. This approach is too simplistic in a business environment that is increasingly complex. "Caps", or arbitrarily imposed limits, create not only ceilings, but floors. Limiting options for a city to negotiate deals on a case-by-case basis shifts competitive advantage. For a company that has other options, an arbitrarily imposed public incentive "ceiling" can become the "floor" from which a negotiation starts.

Nicholas J. Vehr

Q. Does Cincinnati, as a border city, need to offer extraordinary incentives to retain or attract high-salary businesses?

A. Being a border city is not our greatest challenge. Capitalizing on unique opportunities may be. The good news is that there is an extraordinary opportunity right before our eyes. It is called the Third Frontier, Ohio's ten-year, $1.6 billion technology growth stimulus package designed specifically to attract high-wage, highly skilled knowledge workers.

Johnathan Holifield

Q. To what extent can Cincinnati's corporate leaders prevail on a fellow CEO to exercise restraint in seeking the best deal from the city in exchange for keeping his company here or expanding here?

A. A deal is only "best" if all parties benefit. Corporate leaders know this. The Mayor and City Council know this. Cincinnati has a strong culture of corporate citizenship and business community leadership. Our CEOs care about the vibrancy and long term health of our community in making location, expansion and investment decisions.

Michael Fisher

Q. How does a corporate CEO weigh such factors as loyalty to a community and being a "good corporate citizen" against the need to make the best financial deal for his company?

A. CEOs balance many things in their difficult and complex jobs of running a business. They also serve many stakeholders - customers, employees, community and shareholders. Certainly, growing profits on a sustainable basis is an important consideration.

CEOs of the best companies want to make sure that the place in which they operate is healthy and viable because, in turn, that is good for their employees, their image and the products or services they deliver. That is why so many leading Cincinnati companies, like Convergys, in addition to the tax revenues they contribute, are generous investors in United Way, Fine Arts Fund, education, and much more.

Michael Fisher

Q. Can Cincinnati move more aggressively to bring new high-salary jobs and new growth downtown without heavy reliance on corporate tax incentives?

A. In a competitive environment, a city or a business can always do more. Companies look not only at costs and incentives, but at opportunities to grow.

Public incentives targeted to companies that are aligned with unique economic growth opportunities, such as Ohio's Third Frontier project, should continue as a strategy to attract and retain businesses and high-wage, highly skilled, knowledge workers.

Johnathan Holifield

Q. What will it take to remake Cincinnati's downtown so it is once again an urban center where firms need to be and want to be, regardless of incentives?

A. It will take leadership, a plan and resources. These elements are quickly coming together for Cincinnati to enhance safety and cleanliness and increase office, housing and retail uses to in our downtown.

Michael Fisher

Q. Do we need a system like Northern Kentucky's consensus committee to narrow down Cincinnati's development agenda each cycle to a few top investments most of the key "players" will join in supporting?

A. The creation of the Cincinnati Center City Development Corporation (3CDC) is a strong step towards narrowing focus and maintaining discipline against a well-developed and strategically based plan within the urban core. Realization is growing, though, that Cincinnati USA competes as a region in a global economy. Better coordination within the region to enhance our collective chances for success requires continued attention.

Nicholas J. Vehr

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