Ending Piracy, Building Regional Prosperity

by Leigh McIlvaine with Greg LeRoy

July 2014

www.goodjobsfirst.org 1616 P Street NW Suite 210 Washington, DC 20036 202-232-1616

©copyright 2014 Good First. All rights reserved. Executive Summary

Among the most wasteful uses of Those that do address it have had economic development funds are various degrees of success cultivating subsidies used by local governments to a regional economic development pirate jobs from nearby communities culture. Commonly used elements within the same metropolitan area. of successful region-based economic However, two metro areas—Denver, development agreements are tax-base Colorado and Dayton, Ohio— have sharing, transparency policies related to developed successful strategies to business inquiries, programs, curb intra-regional job piracy. Using retention strategies, and shared access explicit anti-piracy agreements focused to community economic development on procedural aspects of economic funds. development practice, the two metropolitan regions have successfully In Denver, Colorado, the Metro Denver halted such abuses. Through these Economic Development agreements, they have also managed to (EDC), employs a Code of Ethics that is develop a culture of regionalism. binding upon participating jurisdictions. The Code requires transparency, The use of subsidies to shift jobs around respect, and cooperation by member a metro area carries the cost of lost tax localities that work together for revenues and reduced services. But the regional prosperity. In the Dayton, Ohio full costs of intra-regional job piracy metropolitan region, the Montgomery go beyond the development subsidies: County ED/GE and Business First! because business relocations are so programs allow member jurisdictions often moves from central metropolitan to participate in a tax-base sharing locations to fringe suburban areas, they program, while also providing access create externalities associated with to a shared economic development sprawl and regional inequality. fund for region-focused projects. Like the Metro Denver EDC Code of Ethics, Although many metropolitan areas the Montgomery County programs struggle with the challenge of intra- emphasize transparency, cooperation, regional job piracy, few have attempted and mutual respect among member to proactively remedy the problem. communities. Both of these metros

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credit successful region-based economic • practicing transparency development strategies for helping win (especially when an incumbent major job creation projects. employer signals a possible

In sharp contrast to these regions are the Twin Cities in Minnesota and • relocation); the Kansas City metro, which spans counties in both Kansas and Missouri. building flexibility into • emphasizing and embedding In their attempts to address intra- agreements; regional job piracy, neither region has emphasized the procedural aspects of • processesreforming ofstate cooperation; economic and such agreements. In the Twin Cities, development program rules the Fiscal Disparities Act has failed to that a) pressure localities to curb local job piracy by simply sharing match state incentives, b) some tax-base growth. The Kansas City allow companies to receive area has a bitter, costly jobs war that the state subsidies for intra-metro two states have so far been unable to relocations that lack the blessing resolve. However, in June 2014, Missouri of the “losing” community, and enacted a law which, if reciprocated by Kansas within two years, will end the (TIF) to be used for intra-metro use of state subsidies for interstate job relocations.c) allow tax increment financing piracy there. Enacted at the insistence of a group of bi-state business interests, the pioneering Missouri legislation has metro areas such as New York, Memphis andthe potential Charlotte. to inspire similar efforts in

Policy takeaways from these successful regional systems include:

• focusing on economic development practitioners

• (rathereducating than key elected community officials);

members;

 www.goodjobsfirst.org Introduction

Good Jobs First has written extensively on the problems created by job piracy, employees’ commuting patterns. and especially on the wasteful use of figure packages to merely change their economic development subsidies when Job poaching is especially corrosive they aren’t incentivizing the creation of because it undermines local tax any new jobs. In our 2013 study The Job revenues. Local job subsidies are Creation Shell Game, we detailed how primarily derived from property taxes states use subsidies to pirate jobs across – revenues that would otherwise state lines—sometimes very short distances in multi-state metro areas like protection, and road, water and sewer Kansas City or Memphis—at great cost infrastructure.fund school budgets, When fire local and governments police to taxpayers. forego property taxes from businesses in the name of economic development, While this “economic war among the they still must provide services to those states” has been recognized and decried companies. That means higher taxes on for decades, far more common are job everyone else, degraded public services, wars among suburbs and between or some of both. cities and suburbs in the same metro areas. Indeed, such moves are far more But intra-regional job piracy also creates common than long-distance relocations costs for an entire region. Good Jobs across state lines. Using powers they First has demonstrated in numerous derive from state law, localities use analyses that subsidized business business incentives to poach jobs from relocations are decidedly sprawling.2 their neighbors. When subsidies Overwhelmingly outward-bound, such are used to lure businesses from one relocations shortchange communities community to another, claims that of color, areas with high “new jobs” are being created are truly and poverty, and neighborhoods hardest fraudulent.1 The waste is especially egregious when the move occurs they also make more jobs inaccessible within the same labor market, with the viahit bypublic plant transit. closings and mass layoffs; result that companies receive eight-

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In addition to the direct costs of jobs from neighboring communities within a metropolitan region is worse than a zero-sum game: it is a net- fringefinancing also new brings infrastructure indirect costs: to serve tax- loss game because overall it reduces basegreenfields, strain in development those localities on the that the amount of funding available for education and infrastructure and other congestion and lower air quality, and lossare abandoned; of arable land. increased Cheaper commuter land, the Managing the use of subsidies by many smallpublic jurisdictions goods that benefit to control all employers. beggar- development sites, and room to expand thy-neighbor practices is a challenge makeappeal the of less-complicatedfringe of many metro greenfield areas overcome by only a couple of metros. innately attractive for many businesses. The problem seems so intractable that So why pay companies to go there? few even attempt to address it. Or, as a Minnesota wag once put it: “Subsidizing economic development in Our report highlights the small number the suburbs is like paying teenagers to of metropolitan areas with various think about sex.” approaches intended to halt the wasteful practice of subsidizing businesses to The use of property tax abatements and simply shift jobs around within a region at taxpayer expense. tax increment financing (TIF) to pirate

 www.goodjobsfirst.org Failing Models in Regions with Piracy

Minneapolis/St. Paul, Minnesota metropolitan area, and even though one of its six stated objectives was, as Balkanized metropolitan areas face a scholars have summarized, “to establish special challenge when communities incentives for all parts of the area to pirate nearby jobs. Minnesota’s work for the growth of the area as sprawling Twin Cities region now a whole,”4 it has failed to engender encompasses 13 counties and hundreds a culture of regional cooperation in of cities and towns in both Minnesota participating communities. Local job and Wisconsin. Faced with central city piracy remains a problem. Through decline in the 1960s and 70s, the state an analysis of 86 intra-metro business responded with the Fiscal Disparities relocations in the Twin Cities region Act (colloquially known as the Weaver during the early 2000s, Good Jobs Act for its lead sponsor, Rep. Charles Weaver of Anoka), a tax base-sharing relocations were outbound, with more program that includes the seven thanFirst adetermined quarter moving that four-fifths 10 miles or of Minnesota counties that then comprised more farther away from the urban the Twin Cities metropolitan region. core. Three-quarters of the relocations were5 subsidized through tax increment all included communities to share 40 percentThe Act, ofin theeffect subsequent since 1975, growth requires in future growth in property tax revenues. their commercial-industrial tax base. financing, a subsidy derived from the That revenue is redistributed among Interviews with “winning” local jurisdictions in the region according to population. As of 2011, 37 percent some actively solicited businesses of the seven counties’ commercial- throughdevelopment a variety officials of methods, found that from industrial property tax base and 11 percent of the total property tax base pitches to partnering with industrial was in the pool.3 realtors.impersonal Even fliers when to business-specific moves were initiated by companies, interviews with Although the Weaver Act has development directors of those localities successfully redistributed incremental gaining or losing the most employers growth in revenues around the made it clear they did not even speak

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to each other at the time, even when Kansas City, Missouri/Kansas companies pitted them against each other (in an echo of the “prisoners’ The Kansas City metropolitan area, dilemma” dynamic that has long been noted among states competing for and Kansas, represents an extreme examplewhich spans of job 15 poaching, counties inwith Missouri both community that lost several employers expresseddeals). One frustration official representing at the use of a move short distances across the state subsidies by its neighbor: “Isanti gave line.state Theand problemlocal agencies is routinely paying referred firms to them incentives. If you try to play ball to as the “border war,” and has become against Isanti you’ll lose. If you go low, so costly for the region that in 2011 they’ll go lower. The cities are going to a coalition of business leaders began have to merge someday.”6 publicly calling for the governors of

So although the Weaver Act’s intention can’t grow this community if we’re using was to make the gains in property ourboth incentives states to agree to steal to froma cease-fire. each other “We tax revenues contribute to regional instead of attracting real new economic equity, local job piracy within the growth,” read an open letter co-signed metro continues. The law’s goal of by chief executives from 17 major reducing competition for economic companies in the region.7 of growth has proven elusive, because Unfortunately for Kansas Citians, itdevelopment did not directly by sharing address the economic benefits multiple attempts by lawmakers in development practice. That is, the law both states to legislate a solution to creates no systems for communication the problem have thus far failed to produce a solution. In 1998, the two no proactive procedures for agencies states signed an anti-piracy agreement toor followcooperation when amonga company localities; indicates it has it that was an utter failure. A more recent might relocate. Lacking such features, attempt to address the border war by the Weaver Act has failed to create in the Missouri legislature also ended in participating jurisdictions any mutual sense of responsibility. there debated a bill that would have requireddisappointment; Missouri in to 2012 stop lawmakers paying companies to move from Kansas, as long as Kansas passed a mirror bill. The uniquely structured law also contained a “stick” provision – had the bill become

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law without a Kansas counterpart, it Silvey, the bill’s sponsor, said during would have obligated the state to spend debate.8 Kansas has not yet responded on economic development at one and a as of publication of this study. half times the rate of Kansas. Despite the good intentions of the In late June 2014, Missouri succeeded lawmakers who have supported these in passing a more toned down version bills, simply banning the use of subsidies of the failed 2012 proposal. The state for intra-metro relocations will fall will stop subsidizing Kansas companies short of creating a new regional culture that relocate into Kansas City’s eight among local governments. Laws that Missouri counties, as long as Kansas frame the two states as competitors passes a companion law within two with a region-based dilemma miss the years. This bill did not come without point: regions are the solution, not the warnings of its own: “If they don’t join problem. If Kansas does reciprocate, hopefully the localities will build on the couple of years down the road where momentum and create systems that us, we may find ourselves in a place a involve face-to-face cooperation. a Kansas act,” Sen. Ryan we are standing on this floor debating

www.goodjobsfirst.org  Regions That Work and Prosper Together

Regional anti-piracy agreements – pacts County Reciprocal Interlocal signed by local governments and/or Agreement12 economic development practitioners that prohibit the direct solicitation of The most successful (2002, agreements, unofficial) used businesses located within the metro for decades in the Denver, Colorado and region – have the promise to promote Dayton, Ohio (Montgomery County) regional prosperity and bring an end metropolitan regions, include more than to the wasteful poaching of jobs from one of these features. neighboring communities. The basis of such agreements varies widely. Tax- base sharing, transparency policies Denver, Colorado related to business inquiries, education programs, retention strategies, and The Metro Denver Economic shared access to economic development Development Corporation (EDC) is funds are all features routinely included a regional economic development in such agreements. Examples include:9 membership comprised of 70 city, county, industry and economic • Cuyahoga County, Ohio: The development groups in the Denver Cuyahoga Business Attraction metropolitan region. The organization and Anti-Poaching Protocol (est. is dedicated to the promotion of the 2011)10 region as “a single economic entity”13 upon which every community relies. • The East Bay chapter of the California Association for Local Members sign a Code of Ethics that has Economic Development: Code been employed since the late 1980s, of Ethics, Lead Solicitation when the Metro Denver EDC, then and Processing for Economic the Greater Denver Corporation, was Development Professionals and founded by eight regional economic (est. 2003)11 development leaders. The Code of Ethics guides member behavior in order • Broward, Miami-Dade and Palm to promote the well-being of the region Beach Counties, Florida: Tri

first, ahead of members’ individual www.goodjobsfirst.org  Building Regional Prosperity

Key Components of the Code of Ethics organizationgains. It has onlyhas beenbeen somodified successful in itsonce pursuit in its 25-plusof regionalism years of that use. it hasThe Transparency. Sharing information produced a sea change in the culture of about potential business expansions and economic development in the region. relocations within and into the region All cities and towns in the Denver is the foundation of the professional metropolitan area follow the Code of culture promoted by the Metro Denver Ethics, whether or not they have signed EDC. on as members of the Denver Metro EDC. We are committed to sharing among our membership However, membership in the Metro as much information as is Denver EDC is not about being necessary and prudent on constrained by its ethics code: it any activity undertaken by or in the name of the Metro participating localities to focus on the Denver EDC. Our guiding bigis about picture. tangible The EDCbenefits functions that free as a principle shall be that “more one-stop shop for businesses that need information is better than less.” also engages in marketing and outreach oneconomic behalf ofdevelopment the entire region, assistance; including it Cooperation. Individual members are foreign trade missions. Metro Denver cultivated as collaborators rather than EDC maintains site selection data and competitors. According to Laura Brandt, property databases that it uses to refer Metro Denver EDC Director of Economic growing and relocating businesses to Development, site location consultants communities with appropriate sites, sometimes attempt to play communities and provides multi-agency coordination against each other within the region.14 assistance to members pursuing To combat this, member organizations projects of regional and statewide share information with the Metro compelling reasons to be a member best suited for the prospect business’s ofsignificance. the Metro Denver Finally, EDCone ofis the accessmost needsDenver and EDC ensure in order that to potential find a location to shared information created by its communities have an culture of transparency. for consideration.

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When representing the effort will be made to contact Metro Denver EDC, we shall the affected community to let endeavor to sell “Metro Denver them know of the potential First” and our individual move. Violation of this communities and projects commitment shall be viewed as second… the single most serious breach of our membership pledge to Respect. Member organizations are the Metro Denver EDC. required to treat each other with respect, especially as it pertains to solicitation of businesses. Challenges to Denver’s Regionalism

At no time shall any member of The commitment to regionalism by the Metro Denver EDC solicit a economic developers – especially in a fellow member’s prospects.…At region so geographically expansive – is no time shall any economic not without challenges. The Denver development organization International Airport (DIA) is located member of the Metro Denver EDC advertise or promote its nearby community of Aurora, Colorado respective area to companies approved25 miles from a massive downtown convention Denver. center The within another member’s development in 2011. The Gaylord geographic area in a manner that is derogatory or insulting meeting, and entertainment facility, to the other geographic area. receivedRockies project, both state a 1,500-room and local subsidies hotel,

Companies that are considering an stoking a controversy over the wisdom intra-regional relocation do so under the of(tax the increment state subsidizing financing a fromfacility Aurora), that known condition of information-sharing has the potential to cannibalize business between communities, and of from the Colorado Convention Center, the legitimacy of another community’s located in downtown Denver. A suit self interest in retaining a business is brought by 11 hospitality companies discouraged through a culture of respect against the state to block the $81 million for member organizations. tourism-based incentive was dismissed early in 2014. In the event a company 15 chooses to relocate from one The same year that the Gaylord Rockies community to another, every project was approved, the National

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Western Stock Show announced that it metro area on more than one occasion. was considering relocating its annual In particular, the Metro Denver events from Denver to a site adjacent to EDC credits its regional model with the new Aurora convention center. The landing Vestas Wind Systems, the show, which is celebrating its 109th Danish wind turbine manufacturer year, is considered a Denver institution. that currently employs approximately (It is now likely that the show’s facilities 16 After a long site will instead be renovated and the Stock selection process in which the company Show will remain in Denver.) settled1,500 Coloradoans. on building a manufacturing facility in Windsor, Colorado, Vestas Such events strain the regional unity made an exciting announcement at its that the Metro Denver EDC strives to ground breaking in 2007. It planned engender in its member communities. to double the size of the Windsor plant and open two additional manufacturing In a membership organization of its size, locations in the state! “there’sBut it’s not always unusual somebody for conflicts not totally to arise. Unfortunately the Windsor expansion according to Brandt. In particular, she plan did not pan out. Having already said,off the “things ranch, heat but uphas when one footthere’s outside,” a seen all available industrial properties in the state, the company asked the cool down…in the long term, it works.” Metro Denver EDC and the Colorado Becausechange in the elected Metro officials Denver but EDC’s eventually site availability of properties, at times suitableOffice of sites.Economic Members Development of the Metro and someselection communities process depends can feel first like onthey DenverInternational EDC collaborated Trade to find and additional quickly are getting fewer prospects than their assembled a site that was owned by the neighbors. Over the long term, says Regional Transportation District (the Brandt, property searches change and area transit organization) and the City of the distribution of projects evens out. Brighton.

Metro Denver EDC believes that its Success Through Regionalism: regional model made it uniquely Vestas positioned to meet this site location challenge. According to the A regional approach to economic organization: development has proved to be a competitive advantage for the Denver www.goodjobsfirst.org 11 Ending Job Piracy

“The Vestas projects were Why Denver’s System Works possible because of the historic collaboration between multiple Professionalism is emphasized. entities and organizations Embedded in each of the above-cited – public and private, federal, components of the Code of Ethics is state, and local – that brought an expectation that members will conduct themselves in a professional technical assistance to bear manner. Disrespecting other throughoutexpertise and the financial site selection and communities, secrecy, and interference and development process. are not understood to be legitimate Colorado is a state with a or reasonable tactics in the pursuit of small government ethos that economic development. The Metro does not allow for the large Denver EDC Code of Ethics guides the conduct of its members away from deals by our competitor states. Collaboration,incentive awards creativity, offered and transparency, cooperation, and respect customer service were crucial asthat core will components harm the region of professionalism. while defining to attracting the world’s leading manufacturer in a Accountability is also key. When a widely coveted industry.”17 member lodges a complaint against another member for unprofessional The Vestas manufacturing facilities conduct contrary to the code of ethics, have been a resounding success and an the Chair of the organization will call ongoing source of economic growth for the Denver region and the state. Despite the expiration of the federal wind member’stogether three behavior to five is members determined into to be energy tax credit in 2012, the company’s a meeting with the offender. If the long term trend is growth. is asked to issue a public apology or In spring of 2014, Vestas announced inappropriate, the offending individual their action and guiding future actions. to its Colorado facilities, bringing total Thisissue process a statement has been to staff necessary correcting employmentit would add 850to over manufacturing 2,000 statewide. jobs 18 only three times in the past 26 years, according to Brandt. Not a single member has ever been expelled from the Metro Denver EDC.

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Ongoing education promotes buy- Montgomery County, Ohio in. In addition to performing the duties of site selection resource center and Nearly as old as the Denver region’s coordinating member projects, the Code of Ethics is the Montgomery Metro Denver EDC informs policy in the County Economic Development/ region and the state through a series Government Equity (ED/GE) program. of annual white papers. Organization Launched in 1991, ED/GE is an members vote to select priority agenda innovative economic development fund items for the year and discussions tied to a small regional revenue-sharing created through this process also program. The economic development serve to educate members on issues (ED) portion of the program makes facing their communities. Moreover, voting serves to create member buy-in. Although it is a less frequent activity, theavailable county. a pool19 Competitive of $5 million grants annually it is perhaps equally important that arefor regionallyawarded twice significant yearly projects after in members are required to re-sign winners of an application process are the Code of Ethics every few years. recommended to county commissioners According to Brandt, re-signing reminds by the ED/GE Advisory Committee

12 public-sector members from havestaff tonew pursue to the regional region economicand newly goals. participating– a group of 15 communities. private-sector and elected officials of the agreement they Relationship-building creates The Government Equity (GE) portion trust. Denver’s regional metropolitan of the program serves the entire region development model has no force of by distributing incremental growth in tax revenues from faster growing to that participants will treat their slower growing or declining areas of commitmentslaw; there is no to legislation regionalism ensuring as a the county. Included in this program binding contract. The Metro Denver is a “settle up provision:” every three model relies upon trust: its members years, each locality’s contributions and believe that the system will serve their distributions are summed up, and if a communities fairly and community has contributed more to the that investments in neighboring region via the GE program than it has feel confident received from the ED fund, it is entitled well. This trust hinges relationship- to receive funds back from the county. buildingcommunities built willthrough benefit active their own as The goal of the GE program is to “share cooperation.

the costs and benefits of economic www.goodjobsfirst.org 13 Ending Job Piracy

growth to promote economic health in in the county, and then the Dayton all communities.” Region.”20

ED applications are evaluated under Communities participate in the ED/GE and Business First! programs because important consideration is that intra- like the Metro Denver EDC, that countya number relocations of selection are criteria; discouraged. an In participation provides them with access order for such a deal to be considered, to shared information about possible one of the following conditions must new projects or potentially footloose be met: a) the incumbent community has inadequate expansion space for access to the competitive ED fund is also the relocating business, b) inadequate firms in their own jurisdictions. But infrastructure exists to support the leverage additional investment through needs of the relocating business, or statea major subsidy draw; programs. that fund is Additionally, often used to c) the existing location has become the Business First! network connects inappropriate for the relocating participating communities to various business. economic development resources available to them in the Miami Valley In addition to the ED/GE program, the area. greater Dayton region utilizes a single point-of-contact business retention The ED/GE program boasts 100 network called Business First! The percent participation among localities in Montgomery County. The Business First! program, in addition to all of agencies,outreach-based development program organizations is staffed by Montgomery County, has grown to a group of more than 50 government include the counties of Miami, Preble, First! communities agree not to “actively Darke, and parts of Greene County. pursue”and nonprofit businesses . within participating Business jurisdictions. When a company lets it be known that it is considering relocating, Key Components of the ED/GE and member communities also agree to Business First! Programs share that information in writing and by phone. The goal of Business First! Communication. In an application is to encourage all communities to “do for ED funds that involves a business whatever may be done to keep the relocation, if one of the above-listed business in the community where they conditions is forcing the business currently reside, but if not, keep them to move, the grant application must

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include a letter from the losing for economic development news and jurisdiction indicating its support leads for participating communities that for the project. An applicant lacking also helps practitioners better serve such support will not receive funding. businesses in the region. This system Business First! requires multiple forms of information sharing both ensures of communication between jurisdictions regional cooperation and enhances the equally as important is its emphasis the region. onaffected open discussion.by a relocating The company,membership but value of service offered to companies in structure is intended to be a “forum for discussion between individual Success through Dayton communities regarding joint economic Regionalism: Motoman development districts, tax sharing and other innovative economic development Yaskawa Motoman is a subsidiary of a initiatives.”21 Japanese corporation that manufactures robotics components in the Dayton Loss Mitigation. The GE portion of the region. In the early 2000s it began program ensures that communities to outgrow its 180,000 square-foot that are not “winning” new businesses headquarters in West Carrollton and are not losing revenues to growing two facilities it occupied in Troy, a jurisdictions. In recent years, the suburb 30 miles north. The company selection criteria for ED applicants expressed interest in consolidation began to encourage relocation when its three leases expired in 2010. applicants to establish tax-sharing “They didn’t pull the Illinois card, but they had the capacity in Illinois to move communities (in addition to and there,” said Erik Collins, Montgomery separateagreements from between the county-wide the two affected GE) County Director of Community & to mitigate tax revenue losses in Economic Development. The region communities losing jobs. began to look for a solution.

Transparency. Business First! requires West Carrollton conducted a Business partner organizations to submit First! retention interview with information about business relocations Motoman to learn about the company’s and other activities into a database needs and how they might be met created for it by the Pennsylvania- within the community. When it was determined that the company couldn’t Pulse.22 The database is a repository obtain the necessary capacity within based consulting firm Executive www.goodjobsfirst.org 15 Ending Job Piracy

West Carrollton, Montgomery County to submit projects that will have to explore options for consolidating impact. Communities that don’t “win” elsewhereeconomic development in the county, officials eventually began a regionally significant economic from awards made other jurisdictions miles from the current headquarters becausedirectly understandworkers commute they will across benefit city location.settling on a Miamisburg site just five lines. Collins describes the county’s approach: “It can’t be my community The project was awarded a $390,000 versus your community, we are ED/GE grant to support a new competing against everyone. We may parking lot and site improvements in have disagreements but if we’re not in Miamisburg. 23 Motoman’s investment regional alignment we are going to be of $18.4 million in the 300,000 square- at a distinct disadvantage in a global market.”26 employees.foot and24 production facility Ongoing education preserves would house between 250 and 275 institutional memory. The County’s Although the short move presumably had little impact on West Carrollton- program have been intentional and based employees of Motoman, the focusedefforts toon education.maintain such In additiona long-standing to company was one of the community’s regular seminars on how ED/GE works largest employers. The tax revenue and sessions, new communities losses to West Carrollton were taken signing on to the agreement and newly into account, and as a part of the relocation deal Miamisburg agreed managers to discuss what is expected of to a tax-sharing agreement, partially themelected and officials what they meet can with get ED/GE out of the reimbursing West Carrollton for program.

Accountability is paramount. Projects 10its lostpercent tax revenues annually for fivean estimated years, that will not produce a regionally starting at 50 percent and tapering agreement. because according to Collins, the ED/GE total of $345,00025 over the life of the Committeesignificant impact views itself are not as accountablefunded, to the entire region: Why Dayton’s Systems Work “We’re trying to be Emphasis on regional prosperity. responsible to taxpayers. ED fund applicants are encouraged We have to be so prodigious

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and accountable of how we committed to cooperation in economic use that money. We need development, there are inherent to understand why that company needs anything… between Montgomery County and other [because] this is a business regionswinners facing and losers. the same The challenges difference lies transaction for the taxpayers. in its willingness to confront the issue of We’re not using [their] money fairness head on and provide a remedy. to move deck chairs around.” As applied by the ED/GE and Business First! programs, tax-base sharing has Fairness is emphasized. The structure been a successful policy to improve of the ED/GE program acknowledges fairness in economic development. that even within a region that is

www.goodjobsfirst.org 17 Policy Lessons

Successful regional anti-piracy piracy agreements can also serve to agreements contain a number of educate communities and economic common characteristics that are critical development professionals about how to changing economic development regional prosperity relies upon their behavior for the good of the region. cooperation.

Focus on practitioners. While Practice transparency to the region’s advantage. Sharing information about “creating” jobs, economic development potential relocations, prospective professionalselected officials do may the work.take credit Long-term for businesses and retention opportunities relationships, institutional memory, and is more valuable to most economic regional culture – be they competitive developers than the meager gains or – lie with practitioners. obtained by poaching jobs locally. Inculcating the region’s professionals One of the most critical outcomes with a sense of responsibility to each of a regionally focused economic other and professional standards development system is the potential focused on regional prosperity can create positive peer norms that will jobs. Anti-piracy agreements with a outlast any election cycle. strongfor officials transparency to help prevent component the loss support of

Educate all key figures. Instilling a sense of regional responsibility in jurisdictionsthis because communitiestheir interest arein relocating notified economic development professionals outwhen of localtown. firms signal to neighboring commitment must also have the Build flexibility into agreements. supportis a progressive of community first step, leadership. but the Agreements should recognize that Education (through personal outreach, communities cannot always meet the , or seminars) on how the needs of incumbent businesses and existing cooperative regional culture allow for respectful self-promotion by localities that may better meet those represent is necessary for newly elected needs. Permitting two communities benefits the communities they officials. Periodic renewal of anti- the flexibility to negotiate their own www.goodjobsfirst.org 18 Building Regional Prosperity

terms on an intra-metro relocation, as • As proposed by various Missouri allowed by Business First! tax-sharing reform bills, states should agreements, is also a useful way to withhold subsidies from intra- promote community buy-in. regional relocations when those companies are not producing Emphasize the process. Attempts to new jobs, especially in cases legislate fairness and/or regulate the where the company lacks the use of subsidies only go so far. Anti- “blessing” of the community from piracy agreements cannot operate which it is departing. In The Job successfully without the buy-in of the Creation Shell Game 40 states with at least one subsidy program that, we disallows identified byelected them. officials, That buy-in economic is achieved development by subsidies for existing jobs that makingpractitioners, these stakeholdersand businesses a critical affected part are merely being moved within of a process that involves negotiating, sharing information, educating and of this common provision to all interacting with each other in ways that statetheir ownsubsidies borders; is an extension achievable build relationships and trust and visibly reform.27 serve local self-interests. • States can help. While the laws to limit the use of this responsibility to cooperate with subsidyReform taxby localincrement governments finance to neighboring localities rests squarely projects that are not relocating on communities, there are a few state from within the metropolitan policies that work against regionalism. region. lower barriers to regional cooperation As demonstrated by the Denver and inAddressing economic these development: deficiencies would Dayton metropolitan regions, anti- piracy agreements have the potential • Abolish provisions commonly to help communities retain jobs and included in state subsidy protect local tax revenues. But these programs that require localities to regions have also proved that anti- “leverage” state incentive money piracy agreements hold promise to with local subsidies. Pressuring transform the way that practitioners communities to ante up only engage in economic development exacerbates intra-regional altogether, by cultivating an economic competition. development ethos that is focused on shared regional prosperity. www.goodjobsfirst.org 19 Notes

1 More information on “job fraud” is available in Greg LeRoy, et al. The Job Creation Shell Game: Ending the Wasteful Practice of Subsidizing Companies that Move Jobs from One State to Another. Good Jobs First. January 2013 At: f

2 See, for example:http://www.goodjobsfirst.org/sites/default/files/docs/pdf/shellgame.pd Greg LeRoy and Karla Walter. The Thin Cities: How Subsidized Job Piracy Deepens Inequality in the Twin Cities Region. Good Jobs First. December 2006 at: f http://www.goodjobsfirst.org/ 3 sites/default/files/docs/pdf/thincities.pd Regional Planning for a Sustainable America. Regional Tax Base Sharing.” Online at http://www. regionalplans.org/featured-regional-planning-programs-and-issues/tax-base-sharing/ 4 Struggle and Blueprint for Regional Cooperation,” William Mitchell Law Review, Vol. 33:2, (2007) at: Myron Orfield and Nicholas Wallace, “The Minnesota Fiscal Disparities Act of 1971: The Twin Cities;

http://www.wmitchell.edu/lawreview/Volume33/documents/4.Orfield.pdf LeRoy and Walter, op cit. 56 Good Jobs First interview with John T. Sullivan, Economic Development Director for the City of Cambridge, Minnesota. August 1, 2006. 7 Kevin Collison. “Top corporate leaders urge governors to stop poaching neighbors’ businesses.” Kansas City Star. April 12, 2011. 8 David A. Lieb. “Missouri legislation seeks to end business border war with Kansas.” Associated Press. February 27, 2014. 9 For more examples, see: Wendy Patton. “State and Local ‘Anti-Poaching’ Agreements: Background Information.” Policy Matters Ohio. September 2006. 10 Cuyahoga Business Attraction and Anti-Poaching Protocol, available online at http:// regionalcollaboration.cuyahogacounty.us/pdf_regionalcollab/en-US/AntiPoachingProtocol.pdf 11 The National League of Cities has hosted the East Bay CALED Code of Ethics online, available at: http://www.nlc.org/Documents/Find%20City%20Solutions/Research%20Innovation/ Economic%20Development/EastBayGuidelines.pdf 12 Miami-Dade County Beacon Council, Inc., Resolution Supporting a Tri-County Reciprocal Interlocal

13 Agreement, Metro Denver February Economic 8, 2002. Development This agreement Corporation was neverCode ofofficially Ethics at:enacted. http://www.metrodenver.org/ about/partners/code-of-ethics/ 14 with Laura Brandt, Director of Economic Development, Metro Denver Economic Development Corporation. May 23, 2014 Carlos Illescas. “Aurora wins battle against Denver hotels in Gaylord hotel project.” Denver Post. April 9, 2014. 15 16 Denver Post. March 11, 2014.

17 MarkVestas Jaffe. summary “Vestas provided Wind bySystems Laura to Brandt, boost Metrohiring Denverat its Colorado Economic . Development Corporation. 18 Kathy Proctor. “Vestas is on a hiring spree at its Colorado wind turbine plants.” Denver Business Journal. March 11, 2014. 19 Some years the fund is smaller as it is dependent upon sales tax revenues. 20

Business First! Intergovernmental Cooperation Agreement, 2011-2015. www.goodjobsfirst.org 20 Building Regional Prosperity

21 Ibid. 22 See http://www.executivepulse.com/ 23 “Five Dayton-area projects to get ED/GE funding.” Dayton Business Journal. May 21, 2010. 24 “Yaskawa America Announces New Motoman Robotics Facility Location.” Robotics Online. June 24, 2010. Available at http://www.robotics.org/content-detail.cfm/Industrial-Robotics-News/Yaskawa- America-Announces-New-Motoman-Robotics-Facility-Location/content_id/2233 “Tax-sharing deal struck for Motoman move.” Dayton Business Journal. May 12, 2010.

2526 Telephone interview with Erik Collins, Director, Community & Economic Development, Montgomery County, Ohio. May 29, 2014. 27 Greg LeRoy, et al. The Job Creation Shell Game, op cit.

www.goodjobsfirst.org 21 Acknowledgements

Good Jobs First gratefully acknowledges the support of the Ford Foundation’s Metropolitan Opportunity Unit which made this research possible.

We also wish to thank Laura Brandt of the Metro Denver EDC and Erik Collins of Montgomery County, Ohio for their invaluable assistance in producing this report.

www.goodjobsfirst.org 22