Less than six months after Ohio Gov. John Kasich vetoed a controversial $60 million tax credit plan aimed at creating rural jobs, a very similar $45 million proposal is close to passage by the Ohio legislature.
Critics say the same issues that have plagued similar programs nationally remain under the current plan, including a possible lack of accountability and the risk that private firms will improperly benefit.
But proponents say the fourth attempt to get this program passed has been amended to allay Kasich’s concerns about the money going to rural businesses.
“We’ve tightened this up a lot,” said state Sen. Bob Peterson, R-Washington Court House, whose district includes much of south-central Ohio. “Ohio has recovered well from the recession, but that recovery is a lot slower in rural areas.
“In a perfect world, we wouldn’t need tax credits … but we just aren’t growing in these areas.”
Peterson inserted the latest plan into an omnibus bill that the Ohio Senate has already passed and that the House could vote on as soon as Wednesday.
Earlier this year, The Enquirer reported on the first version, which critics said mirrored “boondoggles” executed by national investment firms that had disastrous results in other states such as Maine, Wisconsin, Florida and Colorado. Kasich vetoed it shortly thereafter.
Under the new version, investors seeking tax credits can only sink money into rural areas and businesses, both of which are more clearly defined than before as being counties with populations of 200,000 or less (that’s 74 of the state’s 88 counties).
In addition, the previous version allowed up to half the money to go to “high-growth” industries. That provision has been axed.
The tax credits are also spread over six years as opposed to five and the total was lowered to $45 million from $65 million.
When he vetoed the previous version, Kasich said in a statement that there weren’t enough assurances that the money would go to those rural areas, and that his administration would work further with the legislature.
Kasich spokesman Jon Keeling declined comment on the new bill, but confirmed the administration negotiated with legislators on the new version.
The changes aren’t enough for critics such as Wendy Patton with the progressive think tank Policy Matters Ohio. (The previous version was also criticized by the conservative Buckeye Insititute).
“We think $45 million can be better used on other needs for the state, especially as tight as our budget is,” said Patton, a senior project manager with the Cleveland-based group. “For example, we didn’t add to the $200 million in place to fight the opioid epidemic – that was all through earmarks and shifting money around. And that problem is only getting worse.”
Patton also pointed out that the structure of the program is essentially the same: Private investors put their money into a fund managed by a company approved by the state. The fund manager then invests the money into rural companies, and the investors can start taking a 30 percent tax credit on their investment after three years.
Such arrangements have led to fraud and scandals in other states, while Patton also said that the new proposal has “weak” provisions to claw back tax credits if jobs aren’t created or retained or something else happens.
Other critics noted similar programs generally benefit a few specialized investment companies nationally. In the past, those firms have created special fees and exotic loans that create more profit or growth than the actual companies receiving loans may attain.
But Peterson said the potential benefits of more jobs and fewer people leaving rural areas are worth the risks.
“We feel we did a lot with this version to allay those concerns and avoid those situations in other states,” he said. “Right now in some areas, we have people who need to drive an hour and a half to get a decent job … these dollars will be used effectively.”