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An Update.....



Ohio is proceeding with its internal review.  The
following is an Op-Ed piece I have been asked to
write for some local news organizations.  The
study will review Ohio s recent tax study with an
eye towards eliminating certain incentive
programs in hand with major business tax reform.

-------------------------------------

Ohio Conducts Study of Economic Incentive Programs

The State of Ohio is embarking on a $500,000
study of its economic development incentive
programs.  A seven member advisory and oversight
committee chaired by myself, sponsor of the study
legislation, is in place and close to finalizing
a Request for Proposal (RFP) for selecting a
prime contractor.  The study is conceived to
provide the research and systemic cost / benefit
data necessary to evaluate economic incentive
programs on a more holistic basis.  The study
will also review the recent State of Ohio Tax
Study with a view of eliminating onerous business
taxes as a trade off for terminating certain tax
abatement / credit programs.  The study will
identify programs which are working cost
effectively and make recommendations for
improvement.

The oversight committee consists of two State
Senators, two State Representatives and three
appointments by Governor Voinovich which include
a Department of Development official, a
university professor and an economic development
practitioner.  The office of  Budget and
Management will provide contracting authority and
staff assistance.  The Legislative Budget office
will also provide staff assistance.

An important aspect of the study is the
involvement of Ohio s universities in data
collection and analysis.  The objective is to
develop communication between university
economists and local government policy makers to
stimulate discussion on the types of local
projects which create wealth.  Better policy
decisions on the local, state, regional and
federal level can thus be facilitated as well as
enhancement of university curriculum.

Incentive programs among competing states are
escalating and proliferating.  The Office of
Budget and Management has identified 55 state
business assistance programs and 100
miscellaneous tax credits and tax exemptions.

Center cities and inter-ring suburbs are hurting
from the loss of industry to more rural local
governments.  They are properly concerned not
only with the loss of their school and city tax
revenues, increasing crime and social services
costs, but in seeing state programs subsidize the
transaction.   Winner cities seem not to realize
that their taxes are higher as the state
increases its support of urban schools, social
services and crime costs, thus demonstrating the
need for  systemic analysis of economic cost /
benefits.

Questions to be considered include:

1   What is the overall  systemic impact of tax
abatement programs on the economy of Ohio?

2   Are state programs subsidizing the industry
migration from multi-story buildings in urban
centers to sprawled facilities on prime
agricultural land?

3   What are the total costs to rural communities
for new infrastructure and other costs in
addition to the loss of traditional school
revenue?

4   What is the relationship between urban crime
and loss of urban jobs due to industry shifting
within the state under tax abatement programs?

5   What is the relationship between lost
agricultural land and industry relocation from
     economic development grants, cheap land, and
artificially reduced energy costs?

6   What are the benchmarks for measuring
statewide economic health and growth?  Are
counts of jobs created / jobs retained and new
facilities formed, accurate and adequate
as a measure of economic health state wide?

7   What criteria, such as increase in per capita
income are reliable measures of economic
growth?  How do we define wealth creation as a
benchmark measure?

8   Are the increased demands on the state budget
by urban areas for school assistance, social
services and crime control a result of job loss
from intra-state industry migration facilitated
in part by incentive programs? If so, to what
extent could it be quantified?

9  What are the relative benefits of creating a
climate for business growth vs. a multitude of
programs servicing selected industries?

10 Are administrative costs of multiple incentive
programs a significant factor in systemic
efficiency?

These are questions legislators are asking from
Maine to California.  As State budgets are seeing
fierce confrontations between urban and rural
education, both competing with higher education,
children and social services, and all being
pinched by crime control costs and prison
construction, the notion of  systemic efficiency
as set forth by economist Paul Krugman is
increasingly gaining attention.

The Ohio study, properly done, will be useful to
every state.

Ohio is attempting to step up to the challenge.

Charles F. Horn
State Senator - Ohio

(P) 614 466 4538
sen.horn@ix.netcom.com
www.geocities.com/CapitolHill/2817


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