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Toledo's "unintended consequences"



Posted on behalf of Charles F. Horn <chorn@mailr.sen.state.oh.us>

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        The Horn Network - Update #14
        Special Notice - August, 1998

        As you may know, the city of Toledo and the state of Ohio
granted Chrysler, Corp. nearly $262 million in tax incentives to build a
new Jeep plant in Toledo.  The agreement developed after months of
negotiations with Chrysler, in hopes of keeping Jeep in Toledo. 
         
        As part of its incentive package, the city of Toledo agreed to
assume the cost of relocating businesses and residences in the path of
the new Jeep facility.  First, the city discovered it had underestimated
the total cost of the relocations by almost $20 million.  After securing
federal loans to cover this additional cost, the city continued
negotiations with businesses and residents to move off the new plant
site.

        In its August 12 edition, The Toledo Blade reported the first
business to announce it is closing its facility, rather than accept the
relocation offer from the city.  

        "St. Louis-based Allied Healthcare Products, Inc. announced it
was not able to find a suitable site in the Toledo area to move its B&F
line of home care products, so it will close the Expressway Drive plant
by the end of October and transfer production to its manufacturing
facility in St. Louis." 
                                The Toledo Blade
                                Tuesday, August 11, 1998

         This is a perfect example of "unintended consequences"
associated with incentive programs.  These types of unintended
consequences are frequently overlooked when determining the costs of
various programs.  Ultimately, the loss of this company will eliminate
corporate tax revenues paid to the city and state, and cost 160 people
their jobs.  Couple this with the 700+ jobs Chrysler has already agreed
to cut once the new plant is operational, and the stakes are clearly
raised.  Governments at all levels have contributed over $280 million
to cut almost 900 jobs in the Toledo area.  

        This is not the end, however.  Sixteen businesses in the Toledo
area are being forced to relocate from their current site of operation
as a result of this Jeep deal.  How many more companies will leave
Toledo to keep Jeep from moving? 

        That is why I am asking for your help.  I would like you to
submit similar types of stories relating to the "unintended
consequences" of economic development incentive programs.  Examples may
include a variety of unintended consequences, including impacts on local
government services, local government revenues, abandoned buildings,
insufficient utility capacity, additional strain on local school
districts, etc.  

        Feel free to submit your response via e-mail, fax or U.S. mail.

        Thank you for your time and attention to this matter.  Should
you have any questions or comments please contact my aide, Rusty Orben,
in my Columbus office at (614) 466-4538.


        Senator Charles F. Horn
        Ohio Senate, Suite 222
        Columbus, Ohio     43215
        Phone:          (614) 466-4538
        Fax:            (614) 466-7018
        Homepage:       www.Geocities.com/CapitolHill/2817