Cincinnti Business Enviroment Continued

This post if a follow up to yesterday's post on how a better business climate leads to growth. This isn't always an obvious relationship. Increasing taxes and regulation don’t necessarily have a huge impact on growth right away. Proctor and Gamble will not move suddenly because of poor government, even if state taxes increase 30% tomorrow. But, they may start to shift jobs out of town. Yet, in the short-run, bad policies really tend to stifle innovation and make it harder for entrepreneurs who are competing nationally and internationally. Remember when there used to be a bunch of tech start-ups in Over the Rhine? Not any more; the business environment in Cincinnati is becoming less conducive to that type of start-up.

...When people get angry about offices moving to West Chester, they should stop and consider why that's taking place - economic policies more encouraging of growth. Why else would you move out to the boondocks?


In the long-run, bad tax and regulatory policies will also have a big effect when companies are making strategic decisions. NCR’s recent move from Dayton to Georgia was based on expected improved productivity in their new location. When companies are merging you can see this also. Cinergy/Duke and Star Bank/US Bank both decided during mergers to move their headquarters out of Cincinnati. They've both moved to states with better business and regulatory environments. Fifth Third is often mentioned as a merger target. Cincinnati should be very worried about that possibility and potential job shock. Better yet, they should try to turn Cincinnati into the obvious choice for new headquarters. Unfortunately, local policies are causing a significant loss of good jobs and talented workers in Cincinnati, contributing to a brain drain.

Ohio is stuck with some institutions that will continue to be a drag on growth (legacy unions and the labor laws they have pushed through). No doubt also contributing to Ohio's poor business climate, was the 2006 election of Ted Strickland (who favors the U.S. leaving the World Trade Organization) as governor, and the perceived anti-market attitude of his administration. However, stuck though it is in Ohio, Cincinnati can do some things to improve competitiveness.

According to Chief Executive Magazine, business leaders most highly prize low tax rates and perceived attitudes toward business, followed by living environment considerations, such as real estate costs and education. These are considerations that ultimately lead to better business productivity. In the long-term, more productive companies are more successful, grow, and hire more people. This is how a region grows economically.

Based on the concern of this study (and also my biased perspective), if the city wants to grow, it's priorities should be:

1.) Improve local education
2.) Reduce and improve regulation (UrbanCincy has a great post on this today)
3.) Rationalize the transportation system
4.) Improve public safety and perceptions of safety
5.) Improved the perceived attitude of city council towards business
6.) Maybe even reduce taxes.


I would say the top three issues handled by Cincinnati City Council in recents years have been:
1.) The police layoffs.
2.) The issuance of significant debt to pay for a 3.9-mile streetcar system / cuts in bus service.
3.) Kroger executives being yelled at by city council for the seemingly obvious business decision of closing an unprofitable store.

It's simple to set the right goals on what the city should be doing. The politics of making it happen is the tough part. The general move right now appears to be further in the wrong direction, contributing to Cincinnati's relative decline along with the state.