Is it time for corporate-welfare reform in Cincinnati?
You've heard this story before. Company X begins thinking about moving out of the city. Executives drop hints and politicians, ever fearful of losing local jobs, begin negotiations to keep Company X in town. After many private meetings, the politicians sign an agreement giving Company X tax breaks, building improvements, parking or other incentives to stay.
Whether Company X is the Cincinnati Bengals or Lazarus, this cycle is gradually eroding city and state resources — and therefore public services. Lazarus received more than $25 million in incentives in the mid-1990s just for staying downtown. The city even made a 65-year pledge to pay more than $200,000 in property taxes the company would have been responsible for. After threatening to leave town, the Bengals got a new stadium.
Now playing the role of Company X is Convergys, a homegrown billing and customer service provider with more than 3,000 employees.
Convergys wants to consolidate four buildings — three downtown, one in Norwood — into a single site.
The company is shopping for sites around Greater Cincinnati, according to Convergys spokeswoman Renea Morris. She won't say how many sites the company has considered or where.
But it clearly is in the company's interest to keep Cincinnati thinking it might leave for Kentucky or another site and take its jobs out of the city.
Mayor Charlie Luken can take a hint. He sent a letter April 23 to key players in the negotiations: the three Hamilton County Commissioners, business leaders, city leaders and the publisher of The Cincinnati Enquirer. In six paragraphs, Luken called for everyone to work together to keep Convergys downtown.
Convergys obviously has the attention of political leaders. A proposal to close a $50 million tax loophole for businesses was dropped by the Ohio Senate after Luken protested the change would cost Convergys at least $5 million — enough, he feared, to drive the company to Kentucky.
What does Convergys want? Details are scarce, but e-mails and other communications from January through March indicate the company was looking for a flat site with about 700,000 square feet of office space. Eventually, the company believes, it will need 1 million square feet.
Convergys was keen on relocating to the city-owned California Golf Course, but dropped the site after objections from residents (see "Greener Pastures," issue of May 2-8).
A campus-style headquarters might fit into The Banks, the neighborhood planned between the Reds and Bengals stadiums. That's the goal of the Port of Greater Cincinnati Development Authority, in charge of developing The Banks.
Port Authority leaders are quiet about the details because they signed confidentiality agreements with Convergys, according to Port Authority board member Tom Humes.
Negotiators are also mum about the incentives the city might offer Convergys to stay downtown. But the city is working on an incentive package, according to a Feb. 15 e-mail, obtained through a public records request.
The Tristate's fragmented tax system allows companies such as Convergys to maneuver for incentives. Tristate cities, villages and townships all need the payroll taxes.
Another way of doing business is regional revenue sharing, a model used by the Twin Cities region of Minnesota, according to Myron Orfield, a Minnesota state senator and regionalism expert. The Twin Cities began sharing 40 percent of commercial and industrial tax growth in 1971, which helped the region assemble a development package to lure the Mall of America.
"(Cincinnati is) one of the clearest places where sprawl hurts everybody," Orfield says.