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First Person: Ohio’s Economic Renaissance and the Reorganization of Its Economic Development Agencies

Area Development staff writer Dave Claborn recently spoke with David Goodman, Director of the Ohio Development Services Agency, and John Minor, President and Chief Investment Officer for JobsOhio, to get their perspective on the state of Ohio’s economy and how the new arrangement is working out.

September 2013
What was once the Ohio Department of Development is now two organizations — one, a state agency, the other a private, nonprofit economic development corporation. Think of a car dealership. JobsOhio, the non-profit marketing arm is the showroom. The state of Ohio’s Development Services Agency is the service operation behind the showroom. JobsOhio hosts prospects, creates proposals, and puts deals together. In a unique arrangement, JobsOhio funds its economic development efforts from revenue generated by liquor sales — a 25-year franchise it purchased from the state of Ohio through a bond sale. The Ohio Development Services Agency manages tax abatements, enterprise zones, and those things that only a unit of government can do.

AD: Is Ohio in a renaissance? Will it last?

Goodman: I think things are going very well for Ohio competitively. It's a stark change from where we've been. When the Kasich administration took office, there was an $8 billion budget deficit. The administration made tough decisions, but was able to balance the budget and create structural balance without raising taxes.

No one thought two years ago that we'd be talking about this, but we were able to initiate through this budget process a $2.7 billion tax cut — one through an income tax cut, the other on income taxes for businesses — a 50 percent cut for the first $250,000 in a business' income, which is significant. These things amount to economic opportunity and job creation, because they enhance Ohio’s ability to be a much more inviting state than we have been in the past.

Minor: There’s a definite change that's gone on in Ohio these last couple of years. What's exciting is, even with the change that has taken place and the positive direction that we're heading in, we still have a lot more to do. There are just a lot of great prospects and opportunities in front of us. People, companies, businesses are starting to take notice that there has been this shift in Ohio.

For a while, Ohio was just thought of as a manufacturing state or an auto state. But the diverse base that we have here really positions Ohio very well as we look forward — from healthcare to financial services to advanced manufacturing and auto. You've got IT, which crosses all industries; you've got energy; you've got polymers and chemicals. Look at agricultural and food processing — ag is certainly a big thing for Ohio. And so we've got a broad and diverse base of industries here, and I think this is going to position us very well going forward.

AD: Ohio has divided its economic development functions with JobsOhio taking the lead marketing role and the Development Services Agency managing state programs. How is this system working?

Minor: We’ve created a different, more nimble model for business development in the state. It really starts with us being client-centric and putting companies and businesses at the center of everything we do.

Part of this new approach involves our team of people who have business experience. For example, the head of our energy sector has more than 25 years in this industry. He knows the sector; he knows people within the industry and has relationships with them. So, when businesses within his industry start talking about expanding or growing or getting into a new business line, he can talk that language and he can talk strategically with them. We have people that have this ability to talk with company GMs and boards of directors of companies.

Goodman: The lines of demarcation are very clear. JobsOhio is a private-sector organization utilizing private funds for economic development. We work with them to administer a number of grants, loans, and credit programs that are specific to the state of Ohio. For instance, a private entity cannot issue tax credits to businesses, so we have an answer.

So, JobsOhio goes out and utilizes its resources in being able to approach businesses that are thinking of coming to Ohio, thinking of potentially leaving Ohio, or thinking about growing. And they provide incentive packages to them to compete with other states so we can keep these jobs here or bring these jobs to the state of Ohio.

Then, the Development Services Agency works with JobsOhio in providing enhancers — those tax credit programs, those potential loan programs that we administer in helping them cut a better deal. We also work on the back end to make sure that when a business says it is going to create jobs and obtains an enhancement to be able to do so, we make sure that it meets its end of the deal. And if that business gets into trouble, we see if we can't do things to help it [recover] and be able to meet its obligation and create jobs.

Minor: We are also more relationship-oriented as opposed to being transaction-oriented. That means we’re taking a longer-term view, and we want to develop permanent, longer-term relationships with these companies. This is something the companies, the CEOs, can relate to and actually like.

It’s part of the culture that we’re developing here. Our culture and our approach can basically be summed up as a “one-firm, one-state” culture. This extends to our regional network as well as our local development partners. Basically, it’s where we can work together as one to deliver the entire state of Ohio to the companies that are our clients.

Goodman: This administration has a one-track mind as it pertains to creating jobs. Everything we do, everything we think about always goes back to, “Will this make Ohio a better environment for job creation?” And in doing so, it's not just the things that we do, but it's the image that I think we are developing across the globe — that Ohio is a great place to come and do business. We are going to embrace folks that represent economic development opportunities and job creation, and do the best that we can to make the environment positive for them to lay a foundation here and to grow a business and create jobs for Ohioans.

People are taking note. CEO magazine recently recognized that Ohio is the most improved state for job creation and economic development. We moved up 13 spots to 22 from 35 a year ago. I think 22 is not good enough, but we've made significant headway. And my understanding is, back in 2007, we were ranked in the last five. So Ohio is being noticed around the world.

Additionally, within state government, we're coordinating our efforts and breaking down barriers between departments. For example, every Monday morning, I sit down with representatives from Taxation, Transportation, the EPA, the Public Utilities Commission, Natural Resources, and others in order to keep up on what's going on with them and tell them about what's going on with us, just in case there are opportunities to help our constituencies, our customer base. This is something that never happened before. And it's inspired by our Governor who really is demanding creativity and changes and not accepting the status quo.

I'm working on breaking down those silos and getting our folks who work here at the Development Services Agency to not just administer programs, but to also recognize who their customers are and administer to those customers.

Minor: In the past, if a project or a company satisfied two or three criteria, they may have automatically qualified for some type of an incentive. We’re not looking at it that way anymore. We’re not going to lead with incentives. We want to lead with Ohio and why, strategically, it makes sense for a company to be here, to expand here. But at the same time, we certainly recognize that incentives are part of development. I think we’re in a position to use these funds in a smarter way. And again, it goes back to what makes sense for the company or the client and what makes sense for the state.

AD: Is Ohio simply regaining jobs it lost, or are there new jobs, new industries being developed in the state?

Goodman: I don't think we're regaining just jobs that we lost in the past economy, because the economy is so significantly changed. Even if we're re-developing our manufacturing base, we're doing so with new technologies and innovations, so we have a different kind of work force. We're doing things to help create a more solid and educated work force.

For example, the incumbent work force training program is a new initiative to re-train our existing work force. The Governor set aside $50 million initially to improve the existing work force. It’s a huge investment in our existing work force.

AD: It will take an educated work force to continue to attract industries like IBM’s new data analytics center in Columbus, won’t it?

Goodman: Absolutely. But did you know, here in Central Ohio we have one of the highest percentages of college-educated people in the country? We have more college students in Franklin County — at Ohio State and other universities — than any other place except the area around Boston. That means we have a strong, educated work force where you can develop and grow a business.

In fact, through the Third Frontier Program, the Development Services Agency works closely with the universities, which do a lot of research and development. In the past, that was for R&D’s sake. It wasn’t really with the thought toward what kind of economic impact it could have. We’re trying to work with the universities to change that culture.

This provides an incredible opportunity for Ohio. For instance, right here in Central Ohio, Ohio State University is right across the street from Battelle [Memorial Institute]. We have a top-10 research and development institution that’s right across the street from the largest, not-for-profit R&D institution — an incredible marriage! The CEO of Battelle is on the board of Ohio State University, and [the two organizations] are working together and seeing whether there are opportunities. It’s just a matter of getting the word out and coordinating our efforts, but we have the resources to be an economic powerhouse globally.

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