After months of discussions, Central Ohio suburbs are still trying to reach an agreement to stop competing for businesses moving across local borders
In its 2011 annual report, Bob Evans Farms Inc. said it needs to reach out for consumers’ “share of stomach.”
The phrase referred to competition in the restaurant industry, but it also could’ve described the sinking feeling in the stomachs of many when the iconic Columbus company announced it will be closing its South Side headquarters of 50 years and moving to financially greener pastures in New Albany.
Lured by millions in tax incentives, Bob Evans will invest at least $33 million in its new home and create at least 360 new jobs. It’s expected that in four years the company will have an annual payroll of $35 million and employ 510. Ground was broken in April for a facility that will encompass administration, operations and research and development space.
About three months before the March 2011 announcement that it was moving, city managers and mayors in Franklin County, urged on by the city of Columbus, began meeting to talk about the hazards of using financial incentives to entice companies to relocate from one Central Ohio community to another, effectively forcing the region to compete against itself.
The practice, derisively called job poaching, has been a staple of economic development across Ohio. At the least, it appeared as if giveaways were the norm and not the exception when it came to a city snagging companies and their accompanying payroll-tax dollars.
The group of city officials initially discussed the broad philosophical benefits and disadvantages of the incentive game. Does it truly help the region grow in the long term?
“We are spending a lot of money incentivizing businesses in the state of Ohio. Maybe we should be taking a look at that,” said Dave Collinsworth, the city manager for Westerville. “And in the abstract, everyone agrees with that.”
And then Bob Evans said it was picking up its sausage patties (or links) and leaving its current home. New Albany offered the company—which recorded net income of $54.2 million on sales of $1.68 billion in its 2011 fiscal year—nearly $10 million in incentives in the forms of an $8.29 million, 15-year property tax abatement, an income-tax credit of $826,000, and a loan program that includes a $1 million interest-free loan for 10 years.
New Albany’s first official contact about the project came through a May 2010 letter it gave to a third-party consultant working on behalf of Bob Evans, a city spokesman said.
What propelled the move came a year earlier when a Bob Evans employee casually inquired about carving out an exercise area for workers. The question prompted company officials to examine their long-term needs and how the South High Street facility fit into the picture. “We began to say, ‘Let’s look at all of our options,’ ” said Margaret Standing, director of corporate communications for Bob Evans.
In its 50 years in Columbus, Bob Evans had cobbled together a string of buildings from which to run 564 of its namesake restaurants and 145 Mimi’s Cafes, plus its retail trade. Standing said the company decided it would be less expensive overall to start with a clean slate, which it got on 40 acres of undeveloped land in New Albany. There were also advantages to the site’s proximity to highways and Port Columbus International Airport.
The new home is good news for the company but bad news for Columbus, which will lose about $600,000 annually in property-tax revenue. The move also made Bob Evans the most recent poster child for an incentive system some believe is running amok.
The most ardent advocate of change is Columbus Mayor Michael Coleman, who views the discussions among local mayors and city managers as a way for neighbors to quit cannibalizing each other’s jobs and instead embrace a more coordinated regional approach to economic development. “You are taking money from the left pocket and moving it into the right pocket,” he said.
And after meeting for a year and a half, the result of all those discussions so far is this: Several communities have pledged to talk more often.
Under that pledge, a handful of cities will abide by a moratorium on offering incentives that would poach existing jobs from their neighbors. Instead, they will open discussions with each other when it becomes known a business is looking to move. This voluntary pact, which doesn’t apply when a community is vying for new jobs, would run on a trial basis from June 1 through Dec. 31, 2013. Several councils of participating communities have already signed on or are considering the pledge.
Notably absent, however, are the cities of Westerville, Whitehall, Canal Winchester, Dublin and New Albany, whose city manager in mid-April said he personally could not recommend it to his city council should Dublin decline to join, which it did on April 23. Upper Arlington officials also indicated they would not sign the agreement if Dublin doesn’t.
The development hasn’t derailed Coleman’s belief that something like this is needed, but it does illustrate the difficulty in finding common ground that enhances regional economic development but protects the turf of individual cities.
“If we have key competition around the outerbelt opt out of this, I can’t see us supporting it,” New Albany City Manager Joe Stefanov said in an interview before Dublin officially backed away from the pact.
His peer in that city said finding a consistent and digestible way to restrict incentives is not easy. Differences in the communities’ business sectors, demographics and types of incentives employed—tax increment financing or property tax abatement, for instance—make it hard to please everyone.
“We would need to come to terms that are fair and acceptable,” said Dublin City Manager Marsha Grigsby. “Part of the reason this has not been done before is because it is so difficult.”
Earlier suggestions to share income-tax revenue soured it for others. Canal Winchester Mayor Michael Ebert said his city didn’t see the advantage and was surprised it was even asked to join. “We went and listened and couldn’t quite get how it would benefit us.”
Westerville’s Collinsworth said the process started to fall apart for him around December, just after the group signed an original letter of intent and officials tried to turn their discussions into an actual agreement. “That’s really the point in time when we started to digress.”
In a nutshell, Collinsworth had too many questions about how it would work. “The devil is always in the details.”
For instance, he wondered if a business from Columbus wanted to move into a multi-tenant, tax-abated building in Westerville, would the latter be obligated to let the capital municipality know?
The issue is one Coleman has addressed periodically during his tenure, dating as far back as his first year. He continues to approach it with a long-term view and said he realizes it is not an easy proposition.
“We are going to change the game in that in the past the developers and the corporate community played jurisdictions off of other jurisdictions,” Coleman said. “This is a first, and I recognize it is going to take some political courage for these jurisdictions to step up.” n
Craig Lovelace is an independent journalist.