The Cincinnati Enquirer Editorial Board recently wrote an opinion about economic development incentives and the need for more oversight. They only cited one specific example.
“The nearly $1 million that city taxpayers gave or loaned Mahogany’s owner Liz Rogers might remain the single most egregious example of how not to do economic incentives.”
As a financial consultant for over 20 years, thank goodness I didn’t have to witness a lot of my clients’ businesses fail. But one was a well-established, upscale restaurant with a reputation for great gourmet fare. From the sidelines, I could see the obvious long-before the owner admitted defeat. But when you are the one who has invested everything you are, your time, reputation, your entire identity and all your family’s money (and then more money that you don’t even have) in this one dream and everybody is counting on you – you’re not allowed to give up. You have to try everything, even beyond reason. It’s horrible.
Last fall I dropped in on a Budget & Finance Committee meeting at City Hall and was surprised to find a crowd in Council Chambers. Normally the only people in attendance are a handful of eccentrics like me, city administrators, and anybody giving a presentation. So I asked the woman in dark sunglasses sitting next to me what was happening.
“We’re here to support Liz Rogers,” she said.
Charlie Winburn, the Chair, had called a special hearing so the public could talk about the Mahogany’s disaster and African-American activists showed-up to highlight our city’s dismal record with minority-owned businesses. The last person to testify that day was Liz Rogers herself, the woman in the dark glasses sitting to my right. She told the Committee about the death threats she’d received, what it was like to be the target of such venom on talk radio every day, how she was a single mom trying to support her son. She wanted to pay the money back, but she didn’t know how she was going to do it if she couldn’t open another smaller, simpler location and that’s why she wanted the furniture we’d paid for with our development incentives. Behind her glasses, her eyes were red and swollen from crying.
I’ve thought about Liz a lot as her name continues to pop up frequently in the news. She’s clearly gone off the deep end. But last night as I was reading documents on line related to the Medpace development in Madisonville, my mind went to her situation for a different reason. Last week City Council voted to amend their original Job Creation Tax Credit Agreement from October 3, 2008. The company said they were going to create 1,339 jobs at an average salary of $70,192. They ran into problems and now the city has to drop those numbers to 844 jobs at an average salary of $55,000.
Our smartest development experts in city administration, the professionals who make these decisions about how we should invest subsidies of all sorts, in cooperation with the talented executives at Medpace, were only off on their projections by a total of $47,567,088 annually, over 50%.
But did we hear an explosion of outrage about our inability to accurately predict the future on this deal?
Not a word. Instead we’re going to give Medpace a $5,000,000 road and Tax Increment Financing with all the trimmings for a $98,000,000 hotel-restaurant complex. All while middle-class taxpayers pay the bills for the corporation’s share of basic services.
In the scope of city incentives, the money we invested in poor Liz Rogers is a drop in the development bucket. The Editorial Board is correct in their assessment that this was not a positive outcome, but my gosh, how long are we going to hammer on her example as the poster child for bad development decisions, provoking a magic porridge pot of public outrage in the media. Give Liz a break. Business is hard for big companies like Medpace and one-woman operations alike. Our frustration should be directed where it rightly belongs. As a city we need to do a much better job of assessing risk and return on all these deals.
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