Perverse Incentives


There's an typical, tawdry, and telling battle over corporate welfare playing out in Cincinnati (and a city near you). Convergys Corp., which does various sort of billing and customer-service support, is threatening to bolt from Ohio to northern Kentucky unless it gets a huge package of tax cuts, etc. to stay in Cincinnati.

The local share of the goodies comes in at around $63 million; the state of Ohio has pledged another $144 million in loans, etc. (Gov. Bob Taft is from the Cincy area).

The twist on this story? As the Cincinnati Enquirer reports, Convergys is still sucking off the teat of Norwood, the Cincinnati suburb that gave the company big breaks to stay put a decade ago.

Norwood's 1996 enterprise zone granted Convergys a 50 percent break on personal property taxes. Convergys in turn agreed to invest $3.9 million, create 450 new jobs and retain another 601 positions.

A 2002 review of this tax break by Norwood and Hamilton County shows Convergys had 724 jobs in Norwood. Convergys now says it employs about 400 in Norwood, and it plans to transfer 300 of those jobs to downtown Cincinnati.

Such areas would be far better off focusing on basic quality of life issues, especially policing and schools. If municipalities would serve up safe streets (absent the racial animus that still lingers in Cincinnati and many other places) and decent schools, they wouldn't have to worry that much about plying corporations with more goodies ever couple of years.