Columbus Dispatch...
Incentives from states to lure companies have fans, foes  
December 4, 2011 

The reported $400 million in incentives being offered by Ohio to Sears Holding to move its headquarters from suburban Chicago to central Ohio reopens a long-standing debate about the value of such deals. 

In this case, a winning bid for the company will net more than 6,000 employees and the prestige that goes with landing the Sears name. 

Sears could easily bring in about $10 million a year in state income-tax revenue, which doesn’t begin to factor in the money the company and its employees would spend and generate in the region and the other taxes they would pay, said Steve Schoeny, an economic-development executive with SZD Whiteboard who previously worked for more than a decade for the Ohio Department of Development. 

“I can’t think of another project in the U.S. in at least the last half-dozen years that was this size — 6,000 jobs, including headquarters operations and salaries,” he said. 

Reports that Sears was shopping for headquarters locations emerged in May. Sears was one of several Illinois companies, including CME Group and Caterpillar Inc., to explore moving after a temporary increase in Illinois’ state corporate-income tax kicked in. 

The field of competitors for Sears was narrowed to Illinois, Ohio and Texas by the fall. Sources familiar with the recent talks said that central Ohio has emerged as the strongest competitor to Illinois, with Texas a distant third. 

The use of such incentives is controversial but growing as states and municipalities compete fiercely for projects that will generate revenue, support other jobs and boost the image of a state as a place that’s business-friendly. States across the U.S. have doubled the number of loans, grants, tax credits and other incentives offered to companies over the past decade or so, according to the Council for Community and Economic Research in Arlington, Va. 

In Ohio, the state Tax Credit Authority approved job-creation tax credits for 2,059 projects from 1993 to 2009. Records show that some of these projects worked, but nearly half were terminated or canceled before completion. 

Illinois’ incentive package for Sears — about a fourth the size of Ohio’s offer — was voted down on Tuesday by the Illinois House, which doesn’t reconvene until January. Part of the reason that House members voted it down was pressure from Occupy Wall Street and other critics of what they view as “corporate welfare.” Criticism of these packages is as widespread as their use around the country. 

“If we’re giving these super-duper discounts to selected companies, what does that say about the overall business climate of the state that we have to do that in the first place?” said Sam Staley, a Dayton native who teaches urban economics and planning at Florida State University. 

“Instead of looking for the headline company, maybe we should be addressing the overall tax code, labor force and other issues in the state. Ohio’s economy isn’t going to come back because we give cut-rate services to a company moving from someplace else,” Staley said. 

Financial incentives certainly aren’t the only factor in company-relocation decisions; the overall cost of business, labor costs and even air service were factors in Chiquita announcing this week that it will move its 375-employee headquarters from Cincinnati to Charlotte, N.C., with the aid of $22 million in incentives from North Carolina. 

Incentives have become expected by many companies. Developing and negotiating these packages has become a mini-industry in itself; experts say the number of jobs, how big a payroll those jobs generate and the scope of the facility are all key factors in determining how much will be offered to a company in loans, tax breaks and other incentives. 

“The anchor store in a mall gets a different deal than the other stores because of their size and drawing power,” Schoeny said. 

A major corporate headquarters brings much more than the workers between its walls, said Jay Biggins, an incentives expert with New Jersey consulting firm BLS Strategies. There’s a radiating effect, from the ability to attract Sears suppliers to generating visitor traffic from vendors. 

There is also concern that Sears, though a venerable brand name in retailing, is no longer a “ headline” company. It has struggled in recent years and lost ground to more nimble discount chains. 

Schoeny said there’s always a risk that a company will fail or move again, but he stressed that governments can protect themselves through guarantees and by structuring deals so that benefits are tied to company performance. 

“A company like Skybus Airlines (which was offered more than $50 million in state and local incentives in 2006) didn’t end up taking much money at all because of these kinds of protections,” Schoeny said. 

Schoeny and others contend that incentives today put states in the game against others that are offering them as part of their overall job-creation strategy. 

“Incentives are what businesses do to get really big customers,” Schoeny said. “That’s how it works.” 

Information from the Associated Press was included in this story. 

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