New Legislative Update in Ohio: The Ohio General Assembly passed HB 1 on February 16, 2011. This is one of Governor Kasich's priorities which will privatize the Ohio Department of Development.  This House Bill is similar to "Arizona's Commerce Authority" a public-private partnership for economic development program which also passed by the legislature on February 16, 2011 it has been signed into law and will go into effect July 1, 2011.  The Ohio Senate approved the bill by a vote of 31-2 and was passed by the Ohio House of Representatives on a party line vote after lawmakers made changes to address some concerns about ethics and public access. 

Ohio HB 1 was signed by Governor Kasich which establishes JobsOhio, a public-private partnership for economic development, and requires the administration to review existing Ohio programs and regulations within the Ohio Department of Development.  Additionally, the administration will examine other state agencies that contribute to economic development and submit a report with proposed changes to the General Assembly within six months. After the general assembly receives these recommendations, it will consider legislation to create a public/private partnership that will perform economic development duties in conjunction of the Ohio Department of Development.

The new JobsOhio will be overseen by a nine member board, including the Governor and eight other appointed officials.  This nonprofit corporation will be responsible for such state economic development functions as directed by law and pursuant to a contract with the Ohio Department of Development. 

A number of states including Florida, Indiana, Michigan, Texas, Utah and Virginia who have semi- privatized their Economic Development Corporation,  have all privatized the Economic Development Department different ways.  Some have implemented strong public-private partnership with little oversight., while others have used some governmental authorities with leadship boards consisting of various businesses.  Ohio is considering how the other states successes with the privatization will function best with the JobsOhio Corporation.  This will be finalized in the coming months.  

Changes to CA Incentive Programs May Decrease Benefit Offered  

California Governor Jerry Brown is proposing to eliminate Redevelopment Agencies and Enterprise Zones throughout California.  Redevelopment and Enterprise Zones are the main economic development tools that California cities and counties have to encourage capital investment and job creation.   Redevelopment Areas allow taxing entities to capture new, incremental property tax that is generated within "blighted" areas in order to help facilitate both public infrastructure and private investment.  Enterprise Zone incentives include:

• Hiring Tax Credit
• Sales and Use Tax Credit
• Business Expense Deduction
• Net Operating Loss Carryover
• Net Interest Deduction

Details on the Governor's proposal are still being discussed and it has faced much opposition.  It is unclear how this proposal would impact projects already receiving Redevelopment Funds.  We will continue to follow this debate and update our clients.  If your company may be impacted by the elimination of Enterprise Zones in California, please contact Bill Labhert at Labhert Miles Consulting Group at 408-266-2259 or you can join the coalition to save California's Enterprise Zones.   

In our last newsletter we informed you of the extension of the New Market Tax Credits program as enacted by Congress in late 2010.  On February 23^rd, the Community Development Financial Institutions Fund (CDFI), manager of the NMTC Program, held a press conference to announce which  Community Development Entitles would receive a portion of the allocation for use of $3.5B in tax credits.  In all, 99 Community Development Entities (CDEs) were awarded allocations, with many of which, incentis group has a working relationship.  Since the Congressional extension, we have been working with CDEs on behalf of clients to obtain allocation commitments for upcoming projects and have witnessed an increase in demand for credit allocation at the economy begins to rebound and investment is, once again, under consideration by many companies.  We are pleased to report that many of these CDEs were chosen for allocation in the 2010 round and we are now able to move forward with securing assistance for these projects.

As rumored in the industry and confirmed by the assortment of allocation recipients, there seems to be a shift in the focus of many CDEs and a renewed pledge by CDEs to commit credits to projects benefiting the most severely distressed communities.  While credits can be allocated to projects taking place in a census tract with minimum poverty percentage of 20% or and median family income of less than 80% of the statewide or MSA average, many CDEs are requiring that projects take place in Severely Distressed census tracts.  In general, tracts qualifying as Severely Distressed must have a minimum poverty percentage of 30%, a median family income of less than 60% of the MSA or statewide average or an unemployment rate at least 1.5 times the national average.  Requiring that a project take place in a Severely Distressed Low Income Community (LIC) is one way a CDE can ensure a project is committed to serving the purpose of the NMTC Program and provides opportunity in a struggling community.

In addition to looking for projects in Severely Distressed LICs, many CDEs are shifting their focus to specific areas of need within the LICs.  One project area creating interest is food supply in urban food deserts, or those areas which have very few food options.  Particularly, many CDEs want to encourage the availability of healthy, fresh food choices in LICs and are choosing to support projects for grocery stores and other food supply related projects.  

We encourage all our clients to consider the NMTC program and the great benefit it may bring to a potential project.  Please contact us today regarding your upcoming projects so that we may determine if the project is a qualifying one.  To learn more about the NMTC program, please contact Larry Kramer at 216-408-1133 or lkramer@incentisgroup.com.

Do Fun and Games Mean Serious Business? 

Incentis Group LLC was commissioned by a state fairgrounds administration to assess the economic and fiscal impacts of their annual State Fair and the various events held at the fairgrounds throughout the year.  The state fairgrounds administration was interested in using the study to validate the organization's impact on the City, County and State in a bid to maintain government funding.  The study took into account numerous inputs in determining the overall economic and fiscal impact of the State Fairgrounds including, but not limited to: direct job creation, event attendance, event length, visitor spending, event operator spending, fair administration spending and the nature of the each event under consideration.  The study demonstrated the economic impacts through the direct, indirect and induced jobs impacts, direct, indirect and induced earnings impacts and overall economic activity that are generated by the state fairgrounds.  The fiscal impacts were demonstrated by the direct, indirect and induced taxes that are generated by the state fairgrounds.

Message from the CEO 

There has been a very positive rebound of investment activity since the beginning of the year.  We are seeing a significant increase in capital investment by our clients, both in proposed construction of new facilities and expansion of existing operations.  These investments are in definite contrast to activity levels of only a year ago.  In particular, we are seeing a high level of activity in the Midwest, Mid-South and Lower South.  We expect this increased level of investment to continue through the end of 2011 if not beyond.

I believe that there are a number of reasons for the recent rise in investment.  Among these are increasing consumer demand, availability of surplus capital and better access to financing, and the ability for companies to expense for tax purposes one hundred percent of qualified capital expenditures that are acquired and placed in service before 2012 (certain property is eligible if placed in service before 2013).  It appears that the latter of these has had real impact on the timing of investments.   We encourage companies to work with their accountants and tax advisors to determine the eligibility and appropriateness of this treatment for their proposed capital expenditures.

As in the past, we are working with many corporations in identifying and securing economic incentives for proposed investments.  This year we are also encouraging companies to have us determine if capital expenditures eligible for 100% expensing may also be eligible for state and local economic incentives and credits that can add further financial benefits.  Please allow us the opportunity to evaluate your new capital expenditures in the coming year to determining eligibility for state and local incentives and credits.

Larry Kramer