FINANCIAL MANAGEMENT/The price of growth

Promoting robust economic development is a priority for every local government. Cities and counties are on a continual quest to lure new businesses and to accommodate existing employers that seek to expand their operations in the community. By doing so, local governments help create new jobs and increase commercial property values.

However, the construction of office buildings and warehouses requires new or upgraded public infrastructure, such as roads and water and sewer pipes. Local governments often use federal or state grant money to fund the improvements, but the grants usually require matching funds from the local governments. Often, helping to foot the bill can create an uncomfortable strain on capital expenditure or general fund budgets.

The Community Improvement Corp. of Henry County, Ohio, (CIC) has implemented a method that finances infrastructure construction and improvement without relying on local government budgets. CIC is a non-profit, public-private 501 C-6 corporation that must contain at least six elected local officials on its 15-member board. It manages an Enterprise Zone program that offers property tax abatements for businesses moving into or expanding operations in the 30,000-resident county. In exchange for the incentives, the corporation asks companies to make donations equal to 10 percent of the abatement value. Companies also are asked to make a donation to local schools equal to roughly 32 percent of their incentive packages. Since the program began in 1998, no company has declined to make the donations.

Depending on the location of the company’s facilities, the 10 percent donation is deposited into one of three development funds managed by CIC that pay for infrastructure improvements: one for Napoleon, Ohio; one for unincorporated Henry County; and another for the county’s villages. CIC has a great deal of flexibility in how it can use the funds. The corporation can award grants, make loans and pay for studies, such as a feasibility study of infrastructure needs. Furthermore, because of its public-private status, CIC can help pay for both on- and offsite infrastructure needs (most government entities cannot pay for onsite improvements). Also because of its status, the corporation does not have to conduct competitive bidding to spend its money.

Over the years, the funds have helped pay for a number of projects. For example, CIC will use fund money to repay a state loan to Henry County that financed a $470,000 water line for a new distribution facility. Also, the corporation awarded a $125,000 grant to Napoleon to build a road for a new business; the grant allowed the city to receive additional state dollars for the project. In another example, the corporation granted $3,000 in fund money to a business to upgrade its electrical service. The Henry County fund is currently capitalized at about $1.7 million, the Napoleon fund at $800,000, and the village fund at less than $150,000.

Because not all local governments offer tax incentives to businesses for economic development, CIC’s infrastructure fund program is not applicable everywhere. However, for those cities and counties that do, it offers an effective alternative to using government budgets to fund infrastructure improvements.

Phil Flavin is the executive director of the Community Improvement Corporation of Henry County.

The author is the executive director of the Community Improvement Corp. of Henry County, Ohio.