Yost recommends changes to economic development program

An annual review of economic development incentives turned up multiple problems with the system that awards loans and grants based on promises of new jobs and bigger payroll.

Ohio Attorney General Dave Yost recommended multiple changes, including assigning the review duties to the state auditor’s office.

“This is not about fixing blame but fixing a system,” Yost said in issuing his 35-page report this week. “Compliance should be based on agreed-upon terms and not adjusted midway through to look better. Ohioans deserve transparency, not fuzzy math.”

The attorney general’s office reviewed economic development awards that closed out in 2018 and found:

■ Half of the economic development loan awards had substantially complied with terms of the loans. The noncompliant businesses received a total of $13.9 million.

■ Roadwork development grants failed to include firm job creation and job retention goals.

■ The state Development Services Agency assessed job goals and payroll commitments when determining compliance but didn’t consider secondary goals.

■ DSA accepted 90% compliance with agreement terms as compliant.

■ DSA didn’t give the AG’s office a list of award recipients that also received aide from JobsOhio, a private nonprofit created by the Kasich administration to handle economic development.

In cases where the company failed to meet the terms of the agreement, DSA often changed the benefits. For example, iMFLUX Inc., in Hamilton, received a job creation tax credit worth $1 million on the promise that it’d create 221 jobs with a $17.5 million payroll. The company created 119 jobs with a payroll of $18.1 million. DSA reduced the tax credit from 60% to 55%.

The report also listed two companies in Mason in Warren County.

Festo Americas LLC received tax credits worth $609,104 on the promise it would create 250 jobs and a payroll of $10 million. Yost’s report listed the company as noncompliant because Festo created 211 jobs with a new payroll of $12 million. No action was taken against its credits, the report says, due to “mitigating economic impact circumstances.”

Cincinnati Fan & Ventilator received a tax credit worth $15,682 on the promise of 63 new jobs and $2 million in new payroll. It got dinged as noncompliant because it created 60 new jobs with a payroll of $2.97 million. No action was taken against the company’s incentives, the report says, and the state deemed it substantially compliant because it attained 90% or greater of its job creation commitments.

Calls to Festo Americas and Cincinnati Fan & Ventilator weren’t returned.

Ohio Auditor Keith Faber said in a statement that shifting the review responsibilities to his office makes sense.

Contact this reporter at 614-224-1624 or email Laura.Bischoff@cmg.com.