Rural jobs tax credit idea gets mixed reviews

A $60 million boondoggle created to benefit large investment firms?

Or a program that will create much-needed jobs in rural areas?

That’s the debate over a new rural jobs tax credit program that made it into the final proposed budget the General Assembly sent to Gov. John Kasich on Wednesday.

The proposed $60 million in tax credits would go to companies that invest or loan up to $100 million for either rural jobs or “highgrowth” industries. It’s a concept that has popped up across the country, but also drawn some opposition from both progressives and conservatives.

“We need to get capital funds into areas outside the big urban areas, and this is a good way to do that,” said state Rep. Wes Retherford, R-Hamilton. “If you want to open a business in one of the big Cs (Cincinnati, Columbus or Cleveland) and you have a decent business model, you have pretty good access to capital and state and local programs. In rural Butler County or Adams County, not so much.”

Retherford twice sponsored versions of a bill that would have created a rural tax credit program, but fell short of passage in each of the last two years.

He said the version headed to the governor now includes better safeguards that came after backers of the proposed credits learned from other states’ “mistakes” and listened to critics.

But those critics aren’t so sure.

“It’s horrible legislation,” said Julia Sass Rubin, a Rutgers University public policy professor who has studied such tax incentive programs for decades. “Ohio here is giving away $60 million in taxpayer dollars and writing a check to these firms. In return, all they need to do is make loans — making money both on the interest rates and tax credits.”

Kasich’s office Thursday offered no indication as to whether the governor was in favor or against the tax credit program, saying all aspects of the budget are under review.

Kasich can line-item veto any budget provision but must do so by midnight Friday.

Ohio’s proposed program is the latest variation of other programs that have also been called “new market tax credits” or “certified capital company programs (CAPCOs)” in different states.

At least 20 states have implemented a version of such tax credit systems in the last decade.

In short, such programs allow investment companies that are approved by the state to either loan or grant businesses funds at market rates and get a tax credit in return.

The results have been mixed. For example, Florida officials have said that the state has gotten back only 18 cents for every dollar invested in such tax credits.

Maine, however, issued a report stating that its program made a difference. That’s even though that state’s program came under intense scrutiny following a major controversy involving a failed attempt to save a paper mill in that state.

Critics say such programs give all the power to outside firms actually making the investments, especially three large companies that specialize in such programs. They also argue the programs strip states of being able to hold firms accountable.

Those firms, Columbusbased Stonehenge Capital Co LLC, Advantage Capital Partners and Enhanced Capital (both from Lousiana) have been involved in similar programs nationally. Stonehenge and Advantage both actively lobbied in favor of Ohio’s version.

Officials with the firms say that they are not the only such companies investing in rural/new market tax credit programs and tout their success and effectiveness.

“The beneficiaries of any community and economic development program are the companies that receive the investments — not the firms that manage the capital and invest in and manage the businesses,” Stonehenge spokeswoman Mackenzie Ledet said in a written statement.