Theorizing about Public Agency and Accountability in State Economic Development Policy: The Case of the OTCA”

Arnold Lewis
Department of Political Science
College of Wooster
Wooster, OH 44691
Email: aclewis@wooster.edu

Paper prepared for the Fourth Annual State Politics and Policy Conference at Kent State University, Kent OH, April 30-May 1, 2004.

Abstract

	The literature is replete with scholars who argue or provide evidence that the structure of political/administrative institutions determines access and influence within the public arena (see Key 1949; Schattschneider 1960; Riker 1982; Miller 1985; North 1990; Hill and Leighley 1992 etc).  The realm of economic development politics is no exception to these claims.  Several scholars have provided ample evidence of the pro-affluent/pro-business mobilization of bias inherent state and local economic development politics and institutions (see Grant 1990; Agranoff 1996; Boeckelman 1997; Feiock and Carr 1998 etc).  Furthermore, this bias has been exacerbated by persistent efforts by state/local elites to reduce public involvement in development policymaking and circumvent the fiscal constraints of the intergovernmental system via the creation of special purpose governments/development authorities and/or public-private partnerships to “manage” development (Sbragia 1996). 

	Yet little research attempts to address the question of how have these reforms affected the degree of the “mobilization of bias” present at the state level in this policy area. Have these reforms “successfully” reduced/managed conflict in the area of economic development policy? How have these institutional changes affected citizen knowledge and involvement in this area?  What have been the consequences?  Thus a case study of the Ohio Tax Credit Authority will be conducted to address these questions.  Specifically, this study will examine the frequency and nature of its review of tax credit applications; the fiscal implications of its decisions; the degree of public access to these decisions; and the nature, and efficacy of public interested activity directed toward these deliberations.

Introduction

	Generally the economic development literature in the sub-field of state politics has focused on questions regarding economic and political determinants of state policy in this area (Dye 1980; Berman and Martin 1992; Saiz 2001) or the economic impact and costs of these programs (Brace 1993; Bingham and Bowen 1994).  Limited effort has been devoted to process evaluation of state economic development policy (with the notable exceptions of Boeckelman 1997; Gardener 2001) whereby one examines the process/participants and institutions involved in the formulation and implementation of development policy.  Several scholars have identified the types of policy instruments used to promote development such as tax credits/abatements, loans, and grants (Clark & Saiz 1999; Reese 1999; Oden and Mueller 1999).  Others have identified the family of institutions that employ these tools such as state/local legislative bodies, executive departments/agencies, public authorities, and public-private partnerships/development corporations (Brierly 1990; Mitchell 1990; Reese 1993; Agranoff and McGuire1996).  Yet most of this work provides limited if any observation of the role of citizens or public-interested actors in the decisional processes of these institutions.  Even Bingham and Bowen (1994) argue for the need for more research devoted to examining management control, evaluation, and accountability (i.e. the internal operations) within development institutions.

	Thus, this paper is committed to addressing the need for more systematic examination of the democratic nature of public institutions at-large, but development institutions in particular.  Gormley (1987) argues that much of what we do as political scientists is institutional policy analysis, but we need to devote more effort to discerning the substantive impact of the institutional reforms we study.  Although this is a worthy criticism, it is arguable that his view of the widespread implementation of a “procedural value” focus of institutional analysts may need to be reconsidered or at least tempered (see Brierly 1990; Sharp 1991 for exceptions).  

	Several types of sub-government institutions have eluded the critical examination of institutional analysts.  As a matter of fact the one particular institutional arrangement of interest in this study, the Public Authority, has been subjected to minimal investigation.  So little is understood about these actors that not until 1990 did anyone attempt to enumerate the scope of their existence.  Mitchell (1990) made the initial scientific effort to account for their existence and found about 6,352 in operation in the U.S.  This was proximate to Walsh’s (1978) estimate of 7,000.  The paucity of research on the Public Authority and the nature of democratic accountability within many of our sub-national development institutions substantiate the need for greater examination of non-traditional sub-national institutions in the U.S.  Specifically, more scholarship is needed regarding the role of the public in these institutions that have ballooned in the later half of the 20th century. 

A Brief History of Sub-national Economic Activism

	State and Local actors have a long tradition of being actively involved in the promoting the development of their respective economies.  State and local actors get involved early on due to the lack of federal leadership in this arena and an under-capitalized private sector.  Thus, given the need for infrastructure and development, the only actors at this time that were capable of marshalling the requisite resources for these tasks were state and cities due to their standing in credit markets and power to tax.  Sbragia (1996) and Wade (1998) provide ample evidence of the evolution and climax of state and local infrastructural and locational policy wars in the19th century.  The waging of these “wars” placed many of them on the verge of financial ruin as a result of their zealous and unscrupulous pursuit of economic prominence.   Also, L Ray Gunn’s (1988) study of New York charts the 19th century efforts of this state to stimulate its economy via infrastructural and entrepreneurial policies such as the granting of subsidies, loans, protected monopolies, the power of eminent domain and charters of incorporation to private investors.  These actions protected and developed farmers/businesses and distributed economic opportunity to various constituencies across the state in conjunction with the distributive politics of road/canal construction and operation.  However, this distributive game eventually became too costly for the treasury and led to the decentralization of state power in an effort to reform the system.  The end result of the reforms was a government too weak relative to corporate and sectional interests that were able to capture the agencies that were given more power.

	Thus, this brief review of the past illuminates several economic and political reasons why sub-national actors have been and currently are in business of economic development.  According to the systems model of policy making, the context or environment of governing institutions serves as the basis for understanding the policies that are adopted within that system.  The environment is full of  “interests” that place “demands” on the polity to respond to select concerns.  These demands may be expressed formally by organized interests or informally via elite perception of public opinion and system stress.  The demands or inputs often manifest themselves as economic or political forces.  Examples of economic demands that have yielded greater promotion of development at the sub-national level are fiscal stress and economic decline (Rubin and Rubin 1987; Sharp 1991; Cable and Feiock 1998) in addition to globalization (Eisinger 1988; Brace 1989; Clarke and Saiz 1999; Saiz 2001).  The political factors that have been established as determinants of development policy are organized interests and the mobilization of bias (Olson 1982; Sharp 1991; Boeckelman 1997; Feiock and Carr 1998); political culture (Berman and Martin 1992); ideology (Saiz 2001); public opinion or perceived electoral threat (Sharp 1991; Wolkoff 1992; Reese 1993; Feiock and Carr 1998); and federalism/intergovernmental competition (Peterson 1981; Eisinger 1988; Schulman 1994; Clarke and Saiz 1999; Saiz 2001).  As these pressures have converged upon the states, they have elicited period and state specific responses as well as universal actions among the states.  These responses historically have encompassed a focus on infrastructure provision, locational incentives, and of recent note an effort to utilize entrepreneurial strategies.  However, the latter strategies are most popular when states are experiencing limited economic stress or competition from their neighbors (Eisinger 1988; Saiz 2001).

The Efficacy of Economic Activism

	The efforts of states to respond to actual and perceived economic needs have received mixed reviews.  Dye (1980) concluded that spending on highways/infrastructure has positive effects on growth in the short term, but he failed to control for national economic trends/forces.  Ambrosius (1989) concluded that these policies have little to no measurable impact on economic growth measured via value-added manufacturing and the unemployment rate. National trends appeared to overwhelm any actions taken by the states, particularly in the area of unemployment.  Thus, in the end she argues that given the costs and uncertainties of these programs, their continual adoption should be questioned.  Brace (1989; 1991; 1993) later concluded that states have become more autonomous economic actors over time and have become more capable of changing their fortunes, but national forces are still very important, particularly when it comes to growth in per-capita income.  Yet state institutional capacity and the number of policies employed seem to affect growth in value-added manufacturing.  Bingham and Bowen (1994) also find that the number of policies adopted by a state positively influences its economy, but spending on economic development exhibits no effect on the economy.  Thus, the actual efficacy of state intervention remains unclear.

Active States: New Institutions

	Despite the failures of past interventions and mixed evidence of efficacy, states still are trying to control/manipulate their economic conditions/fortunes.  However, the constraints on state power that emerged from past excesses have served as the inspiration behind the emergence of alternative institutional approaches to developing their economies.  Sharp (1991) identified three institutional approaches that are available to states/cities to promote the development of their economies.  They are as follows:1) the use of government led development institutions; 2) the creation of quasi-public or public private partnerships; and 3) reliance on private sector led development entities.  Given these choices, many states/communities have turned to quasi-public arrangements such as public authorities (i.e. development authorities) to implement their respective development agendas.  There are several kinds of development authorities.  As constructed by Brierly (1990:1000-01) they are as follows:

•	Industrial Finance Authorities: They issue revenue bonds or other forms of debt financing.  Some of these are created to produce public goods without tapping into general revenue streams.

•	Privately Sponsored Credit Corps: created to supply targeted incentives such as guaranteed loans and interest rate subsidies.

•	State Development Credit Corps: These are also charged with supplying targeted incentives such as guaranteed loans and interest rate subsidies.

 	This begs the question of why have so many states/communities attempted to move away from pure government/public led models of development?  According to Mitchell (1990), the rise of the Public-Authority can be attributed to the progressive movement and the desire to remove politics from the provision of certain public services.  The goal was to produce these goods via a business-based model.  Similarly, Sbragia (1996) argues that traditional local governments created these non-elected, special-purpose governments in order to dilute state power and the power of local electorates.  They were trying to elude state imposed democratic processes in the making of local investment decisions.   Brierly (1990) concludes that state adoption of the development authority approach to development has often resulted from declining economic conditions and the acknowledgement by state leaders of the need for a coordinated effort to address this problem.  However, it appears that the predominant rationale for the new arrangements has been to demobilize public participation and more efficiently promote state and local development agendas.

Development Institutions and the Mobilization of Bias

	Institutions are any set of formal or informal structures that work to structure the decision choices of actors and constrain actor's behaviors to decrease uncertainty and regulate human interaction - reduce transaction costs (North 1990).  The main objective of institutions is the reduction of transaction costs; however depending upon their structure, they can provide incentives or opportunities for various levels and types of organized participation.  Gary Miller (1985) relates the concept of institutionalism to the idea of political participation in his analysis of the impact of Progressive Reforms on structuring who participates, the level of that participation, and the implications of those incentive structures on policy outcomes.  Miller comments on how institutions allocate rights among those that demand influence within them.  This allocation is often unequal and in favor of those who have a high demand for the use of public power.  These high demanders (i.e. elites) favor and promote the establishment of institutions that allocate rights of participation and influence unequally in their favor.  This disadvantages the low demanders (i.e. the mass public/majority) whose policy preferences will never be institutionalized because they do not carry enough weight to reform the institutions to reflect their interests.  Hence, given the “priveleged position of business” according to Lindblom (1977) and its inherent organizational advantages (see Olson 1982) policy outcomes often ring with an upper class bias (Schattschneider 1960).

	Miller (1985) felt that the Progressive-Era reforms such as the primary, non-partisan ballot, and the council-manager plan altered the distribution of rights within political institutions in favor of the high demanders.  These reforms increased the transaction costs of participation for low and medium demanders.  For example, the primary allowed the high demanders to choose whom the masses would choose from in the general election because elites are more likely to participate in the primary (Miller 1985). This is also affirmed by Riker's (1982) belief that the institution of voting/elections does not guarantee that all individual preferences/choices will be represented in the process.  Riker (1982) argues that the nature of choice is limited in a democracy and thus we accept a limited policy agenda.  The implication is that depending on what choices are paired together, the outcome of the policy process can be pre-determined by elites.

	The same could be argued when one examines the trend to “professionalize” and “privatize” state economic development agendas.  Feiock & Carr (1998) contend that the politics of institutional choice is an extension of the politics of development.  For example, Reese (1993) in her study of development professionals concludes that the development agendas that emerged were often the result of bureaucratic decision rules created to help simplify the environment of development policymaking for these administrators.   However, the standardized procedures they employed undermined the ability of the public and/or elected officials to affect decisions made in this arena.  Watson’s (1995) discussion of pub-private partnerships notes the tendency of these arrangements to stress elite concerns with efficiency and growth, but to marginally address issues of social equity.  Furthermore scholars such as Sbragia (1996) and Eisinger (1998) recognize the bias inherent in the creation of special-purpose governments given that many are the result of elite desires to circumvent local electorates.  According to Sbragia (1996):

“These authorities or special-purpose governments do indeed weaken the control of elective institutions over capital investment and increase the power of those interest groups that are most closely affected by such investment decisions.  The relatively insulated and closed nature of the politics surrounding public authorities allows economic-development activities under their control to proceed without much input from the electorate…Given the closed nature of politics in authorities, they are often able to operate with little concern for the wishes of voters.” P.3

Also, according to Sbragia, by the early 1990s:

“non-elected public authorities were the dominant local public investors.  Consequently, the link between electoral accountability and capital investment is tenuous.” P.10

	However, this decline in accountability and mobilization of bias is not an inevitable consequence of institutional change.  These trends can be curbed by investing in institutional reforms that are designed to be more inclusive than exclusive as evidenced by Hutcheson and Prather’s (1988) study of zoning reform in Atlanta.  They found that the implementation of a neighborhood planning process designed to facilitate community identification and information about the zoning process increased participation among the less affluent.  Thus lowering the inequity in participation and access patterns across neighborhoods in Atlanta.  Hence, institutions are and procedural reforms are very consequential and Gormley (1987) was right to assert the need for more substantive evaluations of these choices.  The institutional diversity of development politics at the state level provides a prime opportunity for such analysis.  Thus, the following analysis of the Ohio Tax Credit Authority (OTCA) is an attempt to broaden our knowledge regarding the substantial consequences of one institutional reform: the development authority.

Methodology

	This case study of the OTCA’s activities that will rely heavily on archival sources, government documents, public records and descriptive data analysis.  The goal is to discern the level of activity by the OTCA and the degree of public involvement/accountability present in the conduct of that activity.  The paper will present general descriptive data for the entire span of the OTCA 10 years of existence, but the analysis of the decisional dynamics and public role in these decisions will focus on data obtained from the most recent five years (1999-2003) of hearings held by the Authority.  Some key variables of interest to this study that will be discussed and presented in the tables that follow are:

OTCA Policy Activity (Table 1):

•	Policy Activism: The level of policy activity since the OTCA was established.  This will be measured in terms of the annual number of businesses awarded from 1993 to 2002.
•	Total Credits: This variable is designed to measure the annual total value of the tax credits issued from 1993-1997, 2000-02.
•	Refund Rate: The annual average rate of new/retained employee personal income taxes that will be refunded to businesses receiving OTCA assistance (1993-2002).
•	Jobs Total: The total number of jobs created/retained per year due to tax credit assistance (1993-2002).
•	Unemployment Rate: This will be measured as the average annual rate of unemployment (seasonally adjusted) for the state of Ohio from1993-2002.

OTCA Impact Assessment (Table 2):

•	Credit per Business: This measures the average annual value of the credits awarded per business for the years 1993-1997, 2000-02.
•	Jobs per Business: The average number of jobs created per business per year (1993-2002).
•	Credit/Job Ratio: The estimated annual cost of each job created in terms of tax dollars (1993-1997, 2000-02).
•	Wages: The annual weighted average of wages granted per job created (1993-2002).

OTCA Oversight Activity (Table 4):

•	Claw-backs: The annual percentage of active agreements that have been terminated by the OTCA due to non-compliance (1993-2002.

The OTCA & Public Accountability (Table 5):

•	Consensus:  This is measured as the percentage of the approved applications that received unanimous support from 1999 to 2003.
•	Public Input: The degree of public participation will be examined in terms of the presence/role of public actors at OTCA hearings.  This is measured as the percentage of the OTCA hearings where non-applicant or non-governmental actors officially participated (1999-2003).

The Origins of OTCA

	The key legislation that led to the creation of the Ohio Tax Credit Authority (OTCA) is House Bill 95 (1992).  HB 95 established the Job Creation Tax Credit Program (JCTC) that provides a refundable tax credit to companies seeking to expand current Ohio operations or to begin operations within the state.  Thus, the OTCA (which began operations in January 1993) was established to administer and monitor this program.  The authority is comprised of 5 members: 2 appointed by the governor, 1 each appointed by Speaker of the Ohio House and the Senate President respectively; and the current Director of The Ohio Dept of Development who is the statutory chair of the body. HB 95 charges the OTCA with the responsibility of reviewing applications for tax credit assistance, approving or declining such applications and establishing the level of subsidy the state is willing to provide awardees.  The amount of the credit generally ranges from 50% to 75% of the additional personal income tax revenues the state will receive from the newly employed Ohio residents.  Also because the authority issues what is termed a “refundable tax credit” if a company’s tax liability is less than the amount of the credits earned it is refunded the difference from the State’s treasury (AR 2002).  The maximum term of assistance the OTCA can grant is 10 years.

	The mandate of the authority expanded with the creation of the Job Retention Tax Credit Program (JRTC) in 2001.  The JRTC program is designed to induce current Ohio businesses to retain and reinvest in their current operations within the state.  The program offers substantial tax savings to companies that commit to: 1) retain a minimum of 1,000 of their current employees at the current location and 2) significantly invest in capital improvements or expansion at the current location.  The size of the credit can be as high as 75% of the personal income tax revenues the state receives from these employees for each year of the agreement.  The maximum term of an agreement is ten years.  This program began in January 2002 and is set to expire at the end of 2006.  It was likely a response to both the overall sluggish economy and Ohio’s significant loss of industrial/manufacturing jobs during the recent recession.  
	
	Applicants can be both businesses new to the state or currently operating in the state.  However, in order to be eligible for the credit a business/project must meet several criteria.  Some of the key criterions are: 

1.	The company seeking the assistance must be a non-retail/point of final purchase enterprise.
2.	At minimum the company must create at least 25 new full-time jobs within three years of initial operations that pay an average hourly wage of 150% of the federal minimum wage (currently $5.15/hr).  Certain types of projects can commit to creating only 10 new full-time jobs within three years of initial operations, but the average hourly wage requirement rises to 400% of the prevailing federal minimum wage. 
3.	If the project involves an expansion or consolidation of an existing Ohio business, the company must commit to retaining its current employees.  However, the credit will only apply to the net new employees/jobs created by the company. 
4.	The project must involve a substantial fixed-asset investment in land, building, machinery/equipment, and/or infrastructure.
5.	The company must demonstrate that the project is economically sound and viable.
6.	The company must have the support of the local community in the form of direct and primary financial economic development support.
7.	The company must demonstrate that the credit is a “major factor” in its decision to expand or locate in Ohio.
8.	The company must agree to maintain operations at the project site for at least twice the term of the credit agreement (max 20years). 

The OTCA Application Process

	Upon meeting the general eligibility requirements and garnering substantial financial and political support from the local development institutions where the company operates or intends to operate, the company can submit its application for tax credit assistance.  The application must be accompanied by a $500 application fee.  Applicants must be clear of any significant outstanding issues or liabilities with the Ohio Department of Taxation (ODT) or the Ohio Environmental Protection Agency (OEPA).  The Department of Development (DOD) will determine the “significance” of any issues/liabilities that may exist and will initiate the review process by conferring with the ODT and OEPA.  The application is reviewed by the OTCA’s Executive Director and either the state business development representative or the Governor’s regional economic development representative.   These actors collaborate to determine final eligibility and to establish the level of subsidy that the Executive Director will recommend to the OTCA.  If the applicant receives a favorable review, the Director will send the company a non-binding preliminary commitment letter that specifies the amount and term of assistance that will be recommended to the OTCA.  Upon making its agenda public four days prior to convening, the OTCA reviews the application/recommendation it received from the Director at a public hearing.  The OTCA either approves/disapproves the request and if the application is favorably reviewed it issues a “Tax Credit Agreement” to be signed by the applicant within 60 days.  Once an agreement is signed and returned, the company must comply with the job creation/locational requirements and submit an annual progress report to the OTCA on its activities for the entire term of the agreement.

OTCA Policy Activism

	Since its inception, the OTCA has been a very active institution.  Table 1 indicates that 1266 businesses have received favorable review from 1993 to 2002.  However, the activism of the Authority appears to ebb and flow with the general economic health of the state.  Initially, one might find it a bit surprising to find that the Authority is less active in terms of the applications it approves during the years of high unemployment.  Given the literature has well documented that states/cities are most aggressive actors in the economic development game during times of austerity, one would expect to see the Authority aggressively award credits during periods of high unemployment to stimulate the economy.  This does not appear to explain the behavior of the OTCA.  Even when one examines the data on the average rate of new/retained employee personal income taxes to be refunded to each business (i.e. Refund Rate), it appears that the OTCA’s decisions are not influenced by Ohio’s economic climate.  The Authority has consistently agreed to refund about 60% of the related income tax receipts.  Thus, the decision making within this body may be guided by adherence to accepted rational decisional rules that insulate the institution from the development pressures of the political and economic climate.

	Of the population of 1266 tax credit recipients, I was able to obtain some financial data regarding the minimum costs of the program for 1001 of these businesses.  It appears that estimated minimum total cost to the state in terms of revenue foregone for this subset of businesses was $394,100,000.  Thus, the average business is estimated to have received a refundable credit in the amount of $393,706.29.  In exchange for this assistance, new and current Ohio employers committed to the creation of 136,935 jobs and the retention of 193,955 jobs during the10 year period.  

	Table 2 indicates that the number of jobs committed per business appears to have fallen consistently (with the notable exception of 1997) since the inaugural year of the program.  The estimated costs of each job to the state; however, is noticeably lower in the most recent three year period (2000-02) than in the initial five years (1993-97).  Also, the average hourly wage commitment of businesses has increased by over $4 dollars; while, the years of assistance granted per business is has fallen by about two years since1993.  The latter trend has likely contributed to the fall in the estimated amount of refundable credits granted per business in the last few years relative to the initial five years.  

	Any gains in efficiency could also be a function of changes in the type of businesses served by the programs since 1993.  There has been a substantial decline in the percentage of businesses producing non-durables seeking/receiving assistance and the corresponding rise in service and non-point of final purchase retail recipients (see Table 3).  The percentage of non-durable goods businesses that were approved for assistance went from 33% of the businesses in 1993 to 11% in 2002.  The OTCA states in its 2002 Annual Report that it aggressively sought to expand its activity in IT related areas and the data in Table 3 indicate significantly increased activism in service and retail related industries.  Overall, these data imply that over the years the OTCA may have become a more fiscally efficient manager of the economic development programs under its control.

OTCA Oversight Activity

	The OTCA is also charged with compliance review and evaluation functions.  Thus, it has the power to revise/amend or revoke prior “tax credit agreements” issued to businesses if they are failing/refusing to meet the expectations of the original agreement in terms of business duration, job creation and location specific requirements.  In the instances where the authority may revoke an agreement (i.e. claw-back), it can require the business to reimburse some or all of the tax revenues the state forewent to aid the business up to that point in the original agreement.  Reimbursement requirements are linked to a temporal pro-rating of the business’ fidelity to the original agreement.  Thus, if a business was only able to maintain operations at the subsidized location for only one and one-half times the number of years that it received assistance, it may be required to reimburse the state up to 25% of the credits it received over that time.

	Table 4 provides some insight on the tendency of the OTCA to exercise its oversight powers. Since 1993 the Authority has “claw-backed” at total of 138 or 10.9% of the agreements it has approved.  Actual data for 2001 and 2002 are unavailable at this time because businesses are granted at least three years to comply with the terms of the Tax Credit Agreement before the OTCA can amend or revoke their contract.  Thus, if the 2001 and 2002 recipients are extracted from the sample the average claw-back rate rises to 12.9%.  Additionally, as mentioned earlier, the OTCA has offered/approved shorter contract periods since 1993 which likely have lessened the cost of these programs to the state treasury. 

OTCA and Public Accountability

	The OTCA holds public hearing to review and approve tax credit agreements recommended by the Executive Director on the last Monday of each month (except November).  This format of public inclusion historically was designed to 1) inform the public, 2) involve the public and decrease the degree of public opposition to policy outcomes, and 3) empower the public and promote broader discussion of a policy’s potential impacts (Grant 1990).  Yet, in many cases this format is employed to provide “procedural legitimacy” to elite decisions.  Cole and Caputo’s (1984) discussion of the weaknesses of this strategy for inclusion arrive at similar conclusions.  They contend that the public hearing actually inhibits meaningful discussion because the public lacks expertise.  Hearings generally ask the public to respond to an established agenda, but do not solicit public participation in framing or redefining the agenda.  Lastly, these formats favor a select group of individuals that have a great deal of civic knowledge and oratory skill.  Hence, they provide the average citizen minimal ability to affect public policy.

	Thus, only by assuming that substantial public participation has taken place within local political/development institutions that initially “sponsor” the tax credit application of a business could it be argued that economic development decisions in Ohio are being made in inclusive institutions.  Prior scholarship and the present analysis of the decision making process of the OTCA provide ample evidence to the contrary.  As expected, the OTCA appears to operate beyond the eye and general input of Ohio residents.  Several aspects of its review process and decisional behavior lead to this conclusion.  For example, any business going before the review board of OTCA has already been pre-approved for assistance by the Executive Director in consultation with the governor’s development representative or state business development officer.  The recommended agreement is then submitted to the board for review in a public hearing.  However, the agenda of these hearings are only made public four days in advance and they only occur on the last Monday of each month (except November) from 10am to 1pm in Columbus.  These procedures do not convey any significant desire for maximum participation from the public.  

	It is also important to note that three of five members of the OTCA board are gubernatorial selections.  Thus, changing or challenging an agreement produced by the Director and semi-executive staff is highly unlikely.  This is further substantiated by an examination of the minutes of the monthly hearings of the OTCA since 1999 (n=51).  Every application submitted to this body received consensual approval of tax credit assistance during this time period (see Table 5).  These data do not reveal a single circumstance when a company’s application generated significant controversy/dissent on the board.  Furthermore, there is no record of substantial testimony or deliberation between the actors regarding these decisions or of the presence and opinions of public interested actors in the meeting minutes.  It appears that this institution has successfully eluded public scrutiny.  The question that remains is whether this has been negatively consequential to the public at-large? 

General Assessment of the OTCA

	The OTCA is a highly active institution, but its decision making process appears to be insulated from changes in Ohio’s economy and the related demands of the public.  The data reveal no relationship between changes in Ohio’s economic fortunes and the level of OTCA activism.  However, this apparent “neutral” competence is likely the result of the guidelines by which the OTCA supposedly administers the JCTC/JRTC programs.  Businesses must first seek and receive local support and then approach the authority to be considered for assistance.  The Authority is not charged with the responsibility to actively recruit/solicit businesses to award assistance.  Thus, lessened activity during economic downturns is likely a result of businesses not seeking assistance because they are not interested in expanding their operations.  

	The data also imply that the OTCA may have become a more efficient user of the instruments at its disposal.  Yet, it is difficult to make such a conclusion because the amount of assistance that is awarded per business is a function of several variables beyond the actual credit refund rate and length of the agreement.  Some of these variables that have not been adequately controlled for in this study are changes in the income tax rates, the modal type of jobs created/retained, and the corresponding wages paid.  Although the absence of these factors present significant obstacles to the inferential process, the fact that the credit rates remain fairly stable while the term of assistance is two years shorter by 2002 provides substantial evidence of the OTCA exercising greater discretion.

	As for the broader economic impact on the state treasury, I was unable to answer this question.  The OTCA annually reports the values of fixed capital investment made by tax credit recipients.  However, the OTCA does not report actual or estimated annual data on the net tax revenue gained by the state after refunding part of the personal income taxes withheld from new and retained employees to subsidize these capital investments of select Ohio businesses.  Only the 1999 Assessment Study reports that the JCTC program may have generated estimated net revenues of $144 million in personal income taxes for the state treasury from projects approved during the period of 1993 to 1997.  In response to my concerns about the paucity of data on program cost, one reason cited by ODOD officials was that upon issuing the redeemable tax certificates to compliant businesses they have no way to monitor if the recipients actually redeem the credits from the Ohio Department of Taxation.  Although, I find it highly unlikely that recipients would fail to redeem their certificates.  

	Even if such data were recorded annually; however, these data would still be woefully inadequate to accurately assess the overall impact on the Ohio treasury.  This is the result of one of the key causal assumptions within the JCTC and JRTC programs that the new employees would not have been hired and/or “retained” employees would have been dismissed without this intervention.  Thus, one would have to prove that the each business that received the refundable credit would not have invested or reinvested in Ohio without the credit.  The OTCA’s review process requires it to discern whether the credit is a “major factor” in the company’s decision to invest or reinvest in the state.  However, it appears that this “standing” is acquired a-priori by the sponsorship of local officials and the Executive Director prior to the OTCA hearings.  Furthermore, the lack of rigor in OTCA’s analysis of the “major factor” test is illuminated by its decision in 2001 to award Wal-Mart $2.6 million for a food distribution warehouse already under construction.  Similarly, in January 2002 Kroger was awarded about $1.4 million to facilitate its efforts to relocate and consolidate its distributive operations in central Ohio.  In both cases it is highly unlikely that these investments would not have taken place absent the offer of tax credit assistance.

Conclusions

	The nebulous aspects of OTCA’s financial reporting likely related to the lack of any significant institutionalized public presence/role in its decision making.  It is quite evident that the review and decision making processes of the OTCA do not seek to mobilize the participation of the “average taxpayer” (i.e. low/medium demanders).  This prompts one to question whether or not the OTCA’s procedural norms present a moral hazard to fiscally accountable and efficient decision making.  The consensual voting behavior of the board establishes the fact that conflict is suppressed (at least in the public record) and there is a need to institutionalize a more dialetical review process that values debate/discussion.  At present the OTCA is operating without much public input/access to its decisions and thus has been able to allocate some of Ohio’s development resources according to its own decisional norms that do not place a significant emphasis on fiscal accounting and transparency.  I am not attempting to argue that the OTCA has been excessive in awarding credits, but I am arguing that such an assessment can not be made given the current decisional norms to apparently make “rational” decisions without requisite information.  As Majone(1989:11) argues:

“Such gross disregard for the most elementary rules of evidence is a direct consequence of the failure to recognize the crucial argumentative aspect of policy analysis.  In turn, this failure can be explained by the adherence of most analysts to a methodology that is more concerned with what decisions are made than with how they are made, or how they may be justified in forums of public deliberation.”

	Although Majone(1989) was referring to the role of the analyst, his comments are directed to the actors who rely on the information analysts provide to them to make their policy decisions.  Decision-makers have a responsibility to acknowledge the information they receive, but they must also interrogate the limits of that information and have a desire to know more about the problem and plausible solutions. 

“Argumentation is the key process through which citizens and policymakers arrive at moral judgements and policy choices.”  (Majone 1989: 2)

	Thus, the apparent lack of debate and lack of a critical public presence has made the OTCA quite passive about accurately assessing and formally disclosing the fiscal consequences of its past activities and present decisions.  Hence, the substantive consequence of limited discussion has been the compiling and dissemination of limited information.  Further inquiry into these matters will require on site observation of the hearings, because the minutes lack any accounting of the positions of members of the board or the non-applicant audience (if any exists).  This is the only way to discern if the apparent lack of debate is a function of institutional norms that promote the masking of conflict via a consensual public record.

Table 1: OTCA Activity 1993-2002

Year	Activism	UERate	Total
Credits (a)	Credits
Per
Business	JCTC Jobs	JRTC Jobs	Jobs Total 	Refund Rate	
1993	92	6.6	NA	NA	11,616	15,583	27,199	61%	
1994	122	5.5	NA	NA	13,472	20,413	33,885	61%	
1995	160	4.8	NA	NA	18,106	28,500	46,606	61%	
1996	121	4.9	NA	NA	13,511	17,835	31,346	59%	
1997	151	4.6	$301	$461,944	19,082	26,662	45,744	60%	
1998	122	4.3	NA	NA	11,229	19,482	30,711	57%	
1999	143	4.3	NA	NA	12,454	20,456	32,910	58%	
2000	157	4.0	$27.7	$176,433	17,709	17,438	35,147	61%	
2001	101	4.2	$33.5	$331,683	10,136	15,674	25,810	59%	
2002	97	5.7	$31.9	$328,866	9,620	11,912	21,532	59%	
Totals	1266		$394.1 (b)		136,935	193,955	330,890		

Notes:
a.	Total tax credits measured in millions.  The figure for 1997 represents the total estimated value of credits granted between 1993 and 1997.  Annual financial data were not available to the researcher for the years 1993-97, nor the years 1998-99.  The figures for 2000-2002 are minimal estimates derived from the JCTC Annual Reports for these years.
b.	The total value of all the credits issued is based on the subset of 1001 approved applications that the OTCA reported financial tax certificate data.  Thus, this figure excludes the years 1998-99 for which no tax certificate/credit costs are reported.
Sources: The 1999 JCTC Assessment Study and the Annual Reports of the JCTC Program.

Table 2: OTCA Impact Assessment 1993-2002

Year	Activism	UE
Rate	Credit
Per
Job (a)	Credits
Per
Business (a)	Jobs
Per 
Bus	Wage
(b)	Year	Refund Rate	
1993	92	6.6	NA	NA	296	NA	9.2	61%	
1994	122	5.5	NA	NA	278	$10.20	8.7	61%	
1995	160	4.8	NA	NA	291	$11.83	8.8	61%	
1996	121	4.9	NA	NA	259	$11.45	8.1	59%	
1997	151	4.6	$1,629	$465,944	303	$12.35	8.0	60%	
1998	122	4.3	NA	NA	252	$11.80	7.5	57%	
1999	143	4.3	NA	NA	230	$12.63	7.6	58%	
2000	157	4.0	$788	$176,433	224	$13.54	7.0	61%	
2001	101	4.2	$1,298	$331,683	256	$13.49	7.5	59%	
2002	97	5.7	$1,482	$328,866	222	$14.92	7.1	59%	
Totals	1266								

Notes:
c.	The figure for 1997 is based on the total estimated value of credits granted between 1993 and 1997.  Annual financial data were not available to the researcher for the years 1993-97, nor the years 1998-99.  The figures for 2000-2002 are minimal estimates derived from the JCTC Annual Reports for these years.
d.	This is the weighted average hourly wage for the jobs committed each year in constant 1993 dollars.
Sources: The 1999 JCTC Assessment Study and the Annual Reports of the JCTC Program.

Table 3: Targeted Industries 1994-2002

Year	Durables
Goods	Non-
Durables	Service	Retail
Trades	Finance	Whole
Sale	Trans-
Comm(a)	Misc	
1994	52	33	5	3	2	3	2	0	
1995	64	17	3	3	1	9	2	1	
1996	62	21	7	3	2	3	2	0	
1997	56	20	8	2	2	5	6	1	
1998	50	21	15	4	2	4	3	1	
1999	52	25	14	2	1	3	1	1	
2000	41	18	22	7	1	3	6	1	
2001	43	19	14	6	1	8	7	2	
2002	53	11	12	11	2	6	5	0	

Notes:
a.	Transportation and Communication Industries
All numbers indicate percentages.
Sources: The 1999 JCTC Assessment Study and the Annual Reports of the JCTC Program

Table 4: OTCA Oversight Activity 1993-2002

Year	Activism	UE
Rate	Wage
(a)	Jobs
Total	Refund Rate	Claw-
Backs	Claw
Rate 	Years	
1993	92	6.6	NA	27,199	61%	22	23.9%	9.2	
1994	122	5.5	$10.20	33,885	61%	15	12.3%	8.7	
1995	160	4.8	$11.83	46,606	61%	33	20.6%	8.8	
1996	121	4.9	$11.45	31,346	59%	21	17.4%	8.1	
1997	151	4.6	$12.35	45,744	60%	17	11.3%	8.0	
1998	122	4.3	$11.80	30,711	57%	16	13.1%	7.5	
1999	143	4.3	$12.63	32,910	58%	7	4.9%	7.6	
2000	157	4.0	$13.54	35,147	61%	7	4.5%	7.0	
2001	101	4.2	$13.49	25,810	59%	0	0	7.5	
2002	97	5.7	$14.92	21,532	59%	0	0	7.1	
Totals	1266			330,890		138			

Notes:
e.	This is the weighted average hourly wage for the jobs committed each year in constant 1993 dollars.
Sources: The 2002 Annual Report of the JCTC Program.

Table 5: OTCA & The Public 1999-2003

Year	Meetings
Held	Applicant
Approval
Rate	Refund Rate	Consent	Public Input	
1999	12	100%	58%	100%	NA	
2000	12	100%	61%	100%	NA	
2001	12	100%	59%	100%	NA	
2002	12	100%	59%	100%	NA	
2003	12	100%	(a)	100%	NA	

Notes:
a. Not yet reported.
Sources: The Summaries of the OTCA Meeting Minutes 1999-2003.

REFERENCES

Agranoff, Robert and Michael McGuire. 1996. “Managing Within Federalism: A City Economic Development Perspective.” Presented at the annual meeting of the American Political Science Association, San Francisco.

Ambrosius, Margery. 1989. “The Effectiveness of State Economic Development Policies: A Time Series Analysis.” Western Political Quarterly 42:283-300.

Berman, David R. and Lawrence L. Martin. 1992. “The New Approach to EconomicDevelopment: An Analysis of Innovativeness in the States.” Policy Studies Journal 20:10-21.

Bingham, Richard D. and William M. Bowen. 1994. “The Performance of State Economic Development Programs: An Impact Evaluation.” Policy Studies Journal. 22:501-513.

Boeckelman, Keith. 1997. “Issue Definition in State Economic Development Policy.” Policy Studies Journal 25:286-298.

	Brierly, Allen Bronson. 1990. “Economic Development Authorities In The American States: The Organizational Response To Economic Decline.” Policy Studies Journal 18:999-1014.

	Brace, Paul. 1989. "Isolating the Economies of States." American Politics Quarterly 17:256-76.

	Brace, Paul.1991. "The Changing Context of State Political Economy." Journal of Politics 53:297-317.

	Brace, Paul. 1993. State Government and Economic Performance.  Baltimore: John Hopkins University Press.

	Cole, R. L. and D. A. Caputo. 1984. “The Public Hearing As An Effective Citizen Participation Mechanism: A Case Study of the General Revenue Sharing Program.” American Political Science Review 78:404-416.

	Dye, Thomas. 1980. "Taxing, Spending and Economic Growth in the American States". Journal of Politics 42:1085-1107.
	Eisinger, Peter. 1988. The Rise of the Entrepreneurial State: State and Local Economic Development Policy in the United States. Madison: University of Wisconsin Press.

Eisinger, Peter. 2000. “The Politics of Bread and Circuses.” Urban Affairs Review 35:316-333.
	 
	Feiock, Richard C. and Jered Carr. 1998. “A Quasi-Market Theory of Economic Development Competition.” Presented at the annual meeting of the American Political Science Association, Boston.

	Gardner, Jr., Edwin etal. 2001. “Moving Into Global Competition: A Case Study of Alabama’s Recruitment of Mercedes-Benz.” Policy Studies Review 18:80-93.		

	Grant, Jane A. 1990. “Making Policy Choices: Local Government and Economic Development.” Urban Affairs Quarterly 26:148-169.

	Gormley, Jr., William T. 1987. “Institutional Policy Analysis: A Critical Review.” Journal of Policy Analysis and Management 6:153-169.

	Gunn, L. Ray. 1988. The Decline of Authority: Public Economic Policy and Political Development in New York State 1800-1860. Ithaca: Cornell University Press.

	Hill, Kim Quaile and Jan E. Leighley. 1992. “The Policy Consequences of Class Bias in State Electorates." American Journal of Political Science 36:351-365.

	Hutcheson, Jr., John D. and James E. Prather. 1988. “Community Mobilization And Participation In The Zoning Process.” Urban Affairs Quarterly 23:346-368.	 

	Key, V. O. Jr.  1949. Southern Politics. New York: Vintage Books.

Langer, Laura. 2001. “The Consequences of State Economic Development Strategies on Income Distribution in the American States, 1976 to 1994.” American Politics Research 29:392-415.

Lindblom, Charles E. 1977. Politics and Markets: The World’s Political-Economic Systems. New York: Basic Books.

	Majone, Giandomenico. 1989. Evidence, Argument, & Persuasion In The Policy Process. New Haven: Yale University Press.

	Miller, Gary .1985. "Progressive Reforms as Induced Institutional Preferences.” Public Choice.

	Mitchell, Jerry. 1990. “The Policy Activities Of Public Authorities.” Policy Studies Journal 18:928-942.

North, Douglass. 1990. Institutions, Institutional Change, and Economic Performance. New York: Cambridge University Press.

Oden, Michael D. and Elizabeth J. Mueller. 1999. “Distinguishing Development Incentives from Developer Give-Aways: A Critical Guide for Development Practitioners and Citizens.” Policy Studies Journal 27:147-164.

	Ohio Revised Code Section 122.17 (HB 95)

	Ohio Tax Credit Authority. 2000. Job Creation Tax Credit Program 1999 Annual Report. Columbus: Department of Development.

	Ohio Tax Credit Authority. 2001. Job Creation Tax Credit Program 2000 Annual Report. Columbus: Department of Development.

	Ohio Tax Credit Authority. 2002. Job Creation Tax Credit Program 2001 Annual Report. Columbus: Department of Development.

	Ohio Tax Credit Authority. 2003. Job Creation Tax Credit Program 2002 Annual Report. Columbus: Department of Development.

Olson, Mancur. 1965. The Logic of Collective Action. Cambridge: Harvard University Press.

	Olson, Mancur. 1982. The Rise and Decline of Nations. New Haven: Yale University Press.

	Peterson, Paul. 1981. City Limits. Chicago: University of Chicago Press.

	Reese, Laura. 1993. “Decision Rules in Local Economic Development.” Urban Affairs Quarterly 28:501-513.

	Riker, William. 1982. Liberalism Against Populism: A Confrontation Between the Theory of Democracy and the Theory of Social Choice. Prospect Heights, IL: Waveland Press, Inc.

Rubin, Irene, and Herbert Rubin. 1987. "Economic Development Incentives: The Poor Pay More." Urban Affairs Quarterly 22:32-62.

	Saiz, Martin and Susan E. Clarke. 1999. “Economic Development and Infrastructure Policy.” In Politics In The American States: A Comparative Analysis, ed. Virginia Gray, Russell L. Hanson and Herbert Jacob. Washington, D.C.: CQ Press.

Saiz, Martin. 2001. “Political and Economic Development: Why Governments Adopt Different Strategies to Induce Economic Growth.” Policy Studies Journal 29:203-214.

Sbragia, Alberta M. 1996. Debt Wish: Entrepreneurial Cities, U.S. Federalism, and Economic Development. Pittsburgh: University of Pittsburgh Press.

	Schattschneider, E.E. 1960. The Semisovereign People: A Realist's View of Democracy in America. New York: Holt, Rinehart and Winston.

	Schiller, Zach. 2002. Wal-Mart Special: Ohio Job Tax Credits To America’s Richest Retailer: A Policy Brief. Columbus, OH: Policy Matters Ohio.

Schulman, Bruce J. 1994. From Cotton Belt to Sunbelt: Federal Policy, Economic Development, & The Transformation of the South, 1938-1980. Durham: Duke University Press.

Sharp, Elaine B. 1991. "Institutional Manifestations of Accessibility and Urban Economic Development Policy.” Western Political Quarterly 44:129-147.

Wade, Richard C. 2002. “The Urban Frontier.”  In The Politics of Urban America: A Reader 3rd Edition, ed. Dennis R. Judd and Paul Kantor. New York: Longman Publishing.

	Walsh, Annmarie Hauck. 1978. The Public’s Business: The Politics and Practices of Government Corporations. Cambridge, MA: MIT Press.

	Watson, Sheilah S. 1995. “Using Public-Private Partnerships to Develop Local Economies: Analysis of Two Missouri Enterprise Zones.” Policy Studies Journal 23:652-667.

.1999. An Assessment of the Costs, Benefits, and Overall Impacts of the State of Ohio’s Economic Development Programs: Final Report. Cleveland: The Urban Center at Cleveland State University.