Ohio State Capital Budget: Art & Museum Community Projects, Infrastructure and Social Services Popular

The September, 2017 state Capital Budget Guidance memo released by Ohio Office of Budget and Management Director Tim Keen illustrates lobbying for the Capital Budget Community Projects has begun. A key question is what types of projects are actually funded based upon the recommendation of the Governor and passage by the Ohio General Assembly. The range of projects eligible for state capital budget Community Projects is based upon the state regulations and the state legislative process. Projects must be capital in nature and connected to a state agency either in the form ownership, partnership or through a joint use agreement. Community Projects includes initiatives built around agriculture, arts and museums, economic development, health care, infrastructure, parks, police and fire, social services, sports, telecommunications, veterans and workforce projects. Applicants for funding still range from local governments to university to community colleges and for profit and not for profit organizations.

The FY 2017-18 project types included for Community Projects saw the continued dominance by the arts community for museums, theaters, historical sites but the overall growth in the sector saw a dramatic decline of nearly $20,000,000 in funding. Project types that saw dramatic growth included infrastructure projects, including several parking facilities and a wide range of social service projects. The health care and social service industry in particular again secured a foothold with a number of Community Projects no doubt tied to the opioid crisis around Ohio while support for telecom, parks and workforce saw declines compared to the previous budget. Each state capital bill is different. The economy, government revenue flow and political leadership all impact the scale and scope of the capital budget bill and their Community Projects. Senate Bill 310, the FY 2017-18 capital budget bill, offers critical lobbying lessons for communities as well as public and private sector organizations planning to seek capital bill or other government funding.

Five-Step Public Affairs Lobbying Model Educates Policymakers and Voters

Termed-limited legislatures and a radically divided public demand a shift in how public policy advocates lobby to impact budget, tax, spending, regulatory and policy issues. No longer is merely advocating in City Hall, Statehouse or the Congress through meetings, attending fundraisers or testifying in legislative committees enough to succeed. Instead, a new public affairs model is need to not only educate policymakers on an issue but to educate that policymakers voters. Technology eases this process but a public affairs program is a new lobbying model that expands advocacy into five key steps.

Pittsburgh Corporate Site Location Economic and Market Highlights

Pittsburgh has transformed from a manufacturing job center to an advanced services economy as education and health services, financial activities, professional services and other services now dominate the region’s economy. But the Pittsburgh economy is not growing at the rate of its competitors as it struggles to maintain economic growth levels comparable with emerging southern, mid-sized communities. However, the Pittsburgh MSA remains the 25th largest MSA in the United States. Pittsburgh has a wide array of local and state taxes with high city taxes, but generally in line with competitors related to business taxes. The region has a low cost of living when comparing wages and rents, but has a high poverty rate and low median income. The region graduates 2,700 students a year in computer-related fields and has a higher than average rate of its populace with a bachelor’s degree or higher. However, population decline remains troubling as does a high-poverty rate, low median income and low labor participation rate.

David Robinson Contributes Economic Development Chapter to “Small Town Economic Development” book.

David Robinson has again been published on the topic of economic development this time focused on how smaller communities can create jobs through the use of tourism and other economic development tactics that play on their regional strengths. Small Town Economic Development, published by McFarland Books, is a collection of recent articles by experts presents stories of small-town America’s struggle and describes innovations and practices behind successful revivals. David Robinson contributed an article entitled “Tourism Impacts Economic Development.” Mr. Robinson illustrates how tourism can be part but not all a rural community can do to provide an economic revival. Small Town Economic Development was edited by Joaquin Jay Gonzales, III, Roger L. Kemp and Jonathan Rosenthal, and it outlines a wide range of small community economic development strategies successfully at work. The book can be found at McFarland Books.

Montrose Group Completes Shelby, Ohio Economic Development Action Plan

The Montrose Group recently completed a comprehensive economic development strategy for Shelby, Ohio. Key action steps suggested by Montrose include:

  • Creating a regional PPP to operate economic development in the city
  • Aggressively marketing Technology Park and the Shelby Industrial Park
  • Launching a technology-based economic development strategy known as Start-Up Shelby focused on developing entrepreneurial advisors, a tech company boot camp, STEM workforce, community investment fund and a “makers space” to act as the center of tech company start-up activity
  • Utilizing Ohio’s Downtown Redevelopment District program to redevelop historic properties as central to attracting Millennials and re-creating an economic center for the city

Kasich Administration Kick-Offs State Capital Budget Bill Process

The kick-off is a well-established football tradition most Ohioans are aware of. For serious students of state of Ohio government, the kick-off for the state of Ohio capital budget bill starts with a standard guidance memo from the Director of the Ohio Office of Budget and Management. On September 25, 2017 Governor Kasich’s OBM Director Tim Keen released the FY 2019-20 state of Ohio capital budget guidance memo to state agencies and other organizations that may be eligible for state of Ohio capital funding in the upcoming capital bill.

Keen’s state of Ohio capital budget guidance memo is anything but exciting. It is a highly technical document closer to a legal analysis of what and how capital budget items for the state of Ohio should be submitted. Though boring, the OBM capital budget guidance memo has some very important information in it for those planning to seek capital budget requests. The guidance memo again defines “capital” items to include the “cost of acquiring, constructing, reconstructing, rehabilitating, remodeling, renovating, enlarging, improving, and/or equipping facilities.”

In addition, the memo outlines what projects are eligible for capital budget funding either from a state agency or a community project. State capital appropriations are funded primarily through the issuance of State bonds. Capital budget projects funded through State bonds must (1) fall within the authorized purposes for State bonded debt set forth in Article VIII of the Ohio Constitution and (2) meet federal tax law requirements for tax exempt bonds. To be eligible for bond funding in the State capital budget, a project must fall within the capital purposes authorized by the voters as set forth in the Ohio Constitution such as: highways; local government infrastructure; parks and recreation; natural resources and conservation; higher education facilities; elementary and second public school facilities; facilities to house branches and agencies of State government and their functions, including State office buildings and facilities; correction and juvenile detention facilities, mental health and development disabilities facilities; cultural, historical and sports facilities; and research and development (including coal research and development) and site development. Also, the Ohio Revised Code and federal tax law also contain provisions that govern the allowable uses of bond proceeds for capital projects, including the types of projects and expenditures, and the extent to which non-governmental entities (both private for-profit and not-for-profit) can benefit from the project.

Finally and most importantly for local communities, the Keen FY 2019-20 state capital budget guidance memo acknowledged that the upcoming capital budget will contain the popular community projects that funds arts, sports, economic development, historical, parks, health care and other priority community projects. The release of the Keen FY 2019-20 guidance memo in late September indicates planning and lobbying should begin right away for those seeking state of Ohio capital budget funding. It is anticipated Governor Kasich will rely on local business organizations to make recommendations for capital budget community project funding but members of the Ohio House of Representatives and Ohio Senate will have their own application project. The Keen FY 2019-20 guidance memo does not outline how large the capital budget bill will be and it is likely to start small in the eyes of Ohio’s Governor and grow larger as members of the Ohio General Assembly get more engaged in the process.

Ohio Addressing the Capital Crunch Spurs Company Growth

Before the financial services crisis of 2008-09, money for growing companies was cheap and easy to access. Private banking options were many and those banks were generally aggressive in competing for loaning money to growing companies. Times have changed. Banks hold 117% more cash and 493% more securities in 2015 than in 2010 based upon regulatory requirements tied to the liquidity coverage ratio which creates a minimum deposit requirement according to the Federal Reserve Bank of Cleveland Fourth District Federal Reserve. Also, banks held $69.5B in cash and $79.5B in securities in 2015 compared to $32.1 B in cash and $79.5B in securities 2010 according to the Cleveland Fed. More troubling, private loan growth is up only 25% in the current economic recovery compared to 64%, 30%, and 87% in 2001, 1990-91 and 1981-82 recession recoveries according to the Treasury Department. Growing companies are facing a cash crunch as a result of federal regulations requiring American banks to keep substantial funding in reserve.

States like Ohio have an answer for this capital crunch. That answer differs based upon the stage and industry of the company seeking capital.

All companies start with an idea. Most likely early company funding starts with the owners, their friends, family and whatever fools they can find. If the idea is technology related, Ohio offers an important source of funding through the Third Frontier program. The Ohio Third Frontier Technology Validation and Start-up Fund’s goal is to create greater economic growth in Ohio based on start-up companies that commercialize technologies developed by Ohio institutions of higher education and other Ohio not-for-profit research institutions. The Technology Validation and Start-Up Fund has been designed to: support protected technologies developed at Ohio research institutions that need known validation/proof that will directly impact and enhance both their commercial viability and ability to support a start-up company, and support Ohio start-up and Ohio young companies that license validated/proven technologies from research institutions. The next round of funding through this program is in the middle of December and having a university partner is essential.

Moving into beyond the idea stage into the incubation stage offers these companies access to a wide range of Ohio regional venture capital firms. While not Silicon Valley, Ohio offers a range of venture capital firms serving all corners of the state for a diverse industry base as listed below.

  • JumpStart– focuses on an array of technology sectors, including companies founded and led by women and minority entrepreneurs;
  • Cleveland Clinic– focuses on medical devices, products and companies spun out from the institution’s researchers;
  • Lorain County Community College– focuses on tech-based companies that are in the imaging or incubating phase of development with special focus in the Northeast Ohio region;
  • LaunchDen Capital Fund– primary focus on orthopedic companies;
  • Bizdom– focuses on web- and tech-based start-up companies- Dan Gilbert, Detroit based fund;
  • Case Western Reserve University– focuses on medical technology, business software, advanced materials, fuel cells, and energy storage;
  • Mutual Capital Partners– focuses on healthcare (medical devices and diagnostics) and information technology (business-to-business and mobility software) sectors;
  • North Coast Venture Fund– focuses on biomedical, pharmaceutical, and software sectors;
  • Valley Growth Ventures– Y-town, focuses on software, energy, advanced materials, and additive manufacturing sectors;
  • Rocket Ventures– focuses on medical technologies and software applications which include imaging, surgical instruments/equipment, implant devices, regenerative medicine, and software applications developed for business and healthcare;
  • NCT Ventures– focuses on adtech, big data, enterprise software, heath information technology, logistics, and marketplace and retail technology sectors;
  • Rev1Ventures– focuses on life sciences (specifically in the areas of pharmaceutical, biological and gene therapies and spin-out companies from Nationwide Children’s Hospital’s Research Institute), software, information technology, additive manufacturing, alternative energy, and other sectors;
  • TechGROWTH Ohio– focuses on digital interactive media, biosciences, bio-agriculture, and advanced energy sectors;
  • CincyTech– focuses on a variety of Ohio Third Frontier targeted industries, including software, medical technology, life sciences, consumer digital, and other aligned sectorsin the region;
  • Cincinnati Children’s– focuses on the biomedical sector; and
  • Accelerant– focuses on advanced materials, advanced manufacturing, sensors, healthcare, information technology, aerospace, situational awareness, and surveillance systems sectors.

Companies graduating on to having an actual product or service ready to offer customers will often look to angel investors for their next round of financing. Ohio again has a diverse group of angel investor groups that operate all over the state that include:

  • North Coast Angel Fund– focuses on healthcare (medical devices and diagnostics), biotechnology and software sectors;
  • Queen City Angels– focuses on advanced materials, aeropropulsion power management, fuel cells and energy storage, medical technology, business and healthcare software, sensing and automation technologies, solar photovoltaics, situational awareness, and surveillance systems sectors;
  • East Central Ohio Tech Angel Fund– focuses on companies in rural Southeast Ohio with new proprietary, barrier-to-entry technologies;
  • Ohio Tech Angels – focuses on information technology, advanced materials and life sciences sectors; and
  • Impact Angel Fund– focuses on bioscience/medical, advanced materials, automation, energy and power management, surveillance, and information technology sectors.

Companies ready to grow in the marketplace that are beginning to produce jobs are primed for a conversation with JobsOhio. The state’s private sector economic development organization offers a wide range of economic development loan programs tied to job creation and capital investment. JobsOhio focused on industries such as biohealth, IT, advanced manufacturing and aerospace and aviation with established or expansion stage companies generating revenues. JobsOhio wants more than half of the company revenue to come from other private capital sources and they will require job creation and retention, efficiencies gained, additional payroll, fixed-asset investment commitment, project return on investment, project location, within a three year timeframe. JobsOhio Growth Loans range from $500,000 to $5,000,000 for fixed-asset investment.

For companies moving beyond the start of the marketplace and shifting into full-fledged sustainability, the state of Ohio offer the Innovation Ohio Loan Fund. The Innovation Ohio Loan Fund provides capital-funding for Ohio companies with limited access to capital and funds from conventional financing sources due to technical and commercial risk factors associated with the development of new products or services in targeted industries. They finance up to 75% of allowable project costs with loans typically ranging in size from $500,000 to $1,500,000 with a job creation and capital investment required. Again, targeted industry sectors include: Advanced Materials; Instruments, Controls and Electronics; Power and Propulsion; Biosciences; and Information Technology. Innovation Ohio Loans are focused on established Ohio companies with a minimum of two years of operating history and revenues generated developed a proven product for a proven market have customer orders and reasonable prospects for rapid sales growth have attracted third party capital and has reasonable prospects of continued backing from such investors. Allowable costs are defined as costs that can be capitalized under applicable generally accepted accounting principles (GAAP) and a 5 – 7 year loan term at a fixed rate up to 25% of the allowable project costs.

Ohio is blessed with many public financing options for growing companies facing a cash crunch. Understanding which source to gain the funding from and how to negotiate is the only challenge.