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<br /> ECONOMIC DEVELOPMENT
<br /> WILLIAM FULTON
<br /> Costing Out the
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<br /> Smokestack Chase
<br /> hen Don Jakeway took over as have set up blue-ribbon commissions to what they're up to for the first time.This,
<br /> Ohio's economic development examine the effectiveness of economic in turn, has led to a sharpening of pro-
<br /> director six years ago, he development programs. gram goals and objectives. For example,
<br /> decided that just pulling in companies The accountability trend is driven economist Timothy Bartik of the Upjohn
<br /> and holding press conferences wasn't partly by conservative state legislators, Institute in Michigan argues that most
<br /> enough. Working for Republican Gover- whose small-government ideology is taus- economic development programs simply
<br /> nor George V. Voinovich, Jakeway ing them to question something that looks don't pay for themselves in increased tax
<br /> wanted to make the whole system more suspiciously like left-wing"industrial pol- receipts. But they still can be worthwhile
<br /> accountable—so that the state could icy."And in part, it's driven by the need, investments if they bring in jobs and
<br /> measure success more readily, and make resulting from ever-tighter fiscal condi- improve the general economic health of
<br /> sure that the companies were rewarded tions,to reassess government spending of the region or state. "Too many people
<br /> for doing the right thing,not for threaten- all types. Hence, economic development still think of economic development as a
<br /> ing to move out of the state. programs—long accepted as a political fiscal game, not an employment game,"
<br /> Today, Jakeway presides over an necessity,at the very least—are under the he says. With more accountability, the
<br /> unusual employment tax credit program microscope for the first time. fiscal argument is likely to be "shaken
<br /> • that is nothing if not accountable. The All this is a big change from how eco- out"of the program's goals if it's bogus—
<br /> credit on state income taxes is not fixed;it nomic development has worked histori- and then politicians can debate the pros
<br /> varies depending on the type and pay tally—especially big-time economic and cons of the program based on its
<br /> scale of the job, as well as the socioeco- development, in which mayors and gov- impact on the labor market.
<br /> nomic profile of the worker. Jakeway ernors have played a game of high-stakes Of course, accountability—or, at least,
<br /> works ,vith the state's income tax collet- poker with company CEOs. In that envi- supposedly objective measurement of
<br /> tors to double-check company reporting. ronment, all that mattered was the num- success—may not really be all it's
<br /> And instead of up-front subsidies,compa- ber of jobs that got into the headline; the cracked up to be.Many experts are suspi-
<br /> nies get tax credits only for those new pressure has been on politicians and eco- cious of the numbers companies report.
<br /> jobs they actually create. "If you don't nomic developers to push the numbers as "Only the company knows how much[of
<br /> create a job," Jakeway says, "you don't high as possible, no matter how much a tax break] is enough,"says Schvyeke. If
<br /> get the incentive." truth was in them. "In general, they go a state official asks a company CEO if the
<br /> The Ohio program is just one example after everything that flies,"quips William tax break from the governor helped keep
<br /> of the latest trend in economic develop- Schweke,program director at the Corpo- the company in the state—well, how
<br /> ment programs around the country. It's ration for Enterprise Development, "and many CEOs are going to say no?
<br /> not enough anymore for the governor to claim everything that lands." And there's no question that some-
<br /> hold a photo op at the site of the new fac- The accountability trend has forced a times politicians don't really -want to
<br /> tory and say that a thousand jobs are lot of economic developers to document know whether the deal they're pursuing
<br /> going to be created.Now,both governors is worth it.The accountability trend is lit-
<br /> and their economic development direc- tered with discarded data that showed
<br /> tors are under pressure to be account- Forcing economic some particular incentive was a loser—
<br /> able. They want to prove that the tax but it was chosen because the mayor or
<br /> breaks they're giving away actually make developers to be the governor, finger to the political
<br /> a difference in company location deci- winds,decided it was a winner.
<br /> sions, and to follow up and make sure accountable has led Overall, however, accountability prob-
<br /> that the promised jobs are actually ere- ably will bring more political credibility
<br /> ated. Indeed, governors in several states to economic development, if only by
<br /> ................................................................................. to a sharpening of defusing the notion that economic Bevel-
<br /> • William Fulton is editor of California Plan- program goals an opers are plaid-jacket giveaway artists
<br /> ning & Development Report, a monthly d who will make a deal at any cost. Of
<br /> newsletter. His new book, The Reluctant course,accountability might actually help
<br /> Metropolis:The Politics of Urban Growth objectives. create better public policy in the eco-
<br /> in Los Angeles, will be published early nomic development area as well. But,
<br /> next year by Solano Press Books. clearly,that would be a bonus. 0
<br /> 70 G 0 V E R N t N G December 1996 hair Sundrr photoginph
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