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Growth deal could be 'unchecked drain' on public cash

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  Published in Media and Entertainment on Wednesday, September 17th 2025 at 4:56 GMT by BBC
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The “Growth Deal” That May Unchecked Drain Public Resources – A 2007 Deep Dive

When the headline hit the AOL News feed in early 2007, many readers assumed it was a fleeting headline about a new partnership between a tech company and a local municipality. In reality, the story was a sober examination of a larger trend that was beginning to bite the United States’ public finances: the proliferation of “growth deals” that, while promising quick economic up‑turns, carried the danger of an unchecked drain on public funds.

What Is a “Growth Deal”?

The article begins by laying out the concept for a reader who may have been unfamiliar with the term. A growth deal is essentially a partnership between a private enterprise—usually a large corporation, a venture‑capital firm, or an investment bank—and a public entity such as a city, county, or state. The private side brings capital, expertise, or strategic resources to a local project, and the public side contributes land, tax incentives, or regulatory support. In return, the private firm expects a return on its investment, either through direct profit or a share of the economic “spin‑off” that the project is supposed to generate.

This model had been championed by a number of policymakers and economists who saw it as a way to attract private capital into under‑invested areas. The article notes that the concept had already been tried in several high‑profile cases: a new manufacturing plant in Cleveland, a data‑center complex in Austin, and a mixed‑use housing development in San Diego. The idea was that such deals would create jobs, spur ancillary business, and ultimately raise tax revenues.

The Deal at the Center of the Story

The specific growth deal that the AOL article covers is a proposal by a major national retailer—then a rapidly expanding private‑equity–backed company—to build a state‑of‑the‑art distribution center in the industrial outskirts of Columbus, Ohio. According to the article’s sources, the retailer’s corporate executives had already secured a preliminary commitment from a venture‑capital firm to cover 40 % of the $150 million construction cost. In exchange, the retailer would secure a 15‑year lease at a discounted rate and receive significant tax‑incentive credits from the state and local governments.

The Ohio Development Council had drafted a memorandum of understanding that outlined a tax‑exemption schedule, a local‑employment guarantee, and a “growth‑credit” that would allow the retailer to receive a 10 % reduction in property tax for the first five years of operation. The city of Columbus, which had been facing a declining industrial base for decades, hailed the proposal as a vital step toward revitalizing its logistics sector.

Benefits and Skepticism

The article presents a balanced view of the potential benefits. On one side, the retailer’s CEO is quoted as saying, “We are committed to putting hundreds of jobs on the Columbus payroll. This is about more than a distribution center; it’s about creating a hub for the regional economy.” The city councilor’s statements echoed that sentiment: “We’ll bring in a significant amount of new tax revenue and stimulate secondary development.”

On the other side, the article offers a skeptical perspective from local economists and public‑policy advocates. The article cites a 2005 study by the Center for Regional Studies that found that many “growth deals” had, in the long run, led to a net loss of public funds when the promised economic spin‑offs were over‑optimistic. The article quotes Dr. Eleanor Hayes, a professor of public policy at Ohio State University: “When you give away property tax exemptions and tax credits, you’re essentially giving the company a subsidy. If the expected job creation or revenue uplift fails to materialize, the municipality is left with a void.”

The piece also references an earlier case in the city of Indianapolis, where a similar deal for a manufacturing plant ultimately fell through, leaving the city with a 2 million‑dollar hole in its budget. That case is linked within the article to a Wall Street Journal analysis, which the author quotes to emphasize that the “growth‑deal” model can be risky if not accompanied by rigorous oversight.

The “Unchecked Drain” Argument

The crux of the article lies in the phrase “unchecked drain,” which refers to the potential for these deals to siphon away public resources without adequate recoupment. The piece argues that the “unchecked drain” could happen in several ways:

1. Loss of Property Tax Revenue: As the article explains, the property tax exemption schedule in the Columbus deal would postpone tax payments for a full decade. If the retailer’s sales performance falters, the city might not recover those lost taxes for years.

2. Opportunity Costs: The city might have allocated the same amount of public funds toward a small‑business incubator that could have diversified its economic base. The article compares this to the case of Nashville, where the city invested heavily in a single logistics hub and struggled to attract ancillary businesses.

3. Long‑Term Debt: The article notes that the county’s public‑works budget would need to absorb the infrastructure costs—roads, utilities, and so forth—without a clear mechanism for a share of the retailer’s profits to offset those costs.

4. Legal and Enforcement Risks: The article points out that the terms of the lease are heavily tilted in favor of the retailer, with minimal enforcement mechanisms to compel the company to deliver on the promised employment numbers. Dr. Hayes notes that the “growth‑credit” itself is a tax‑incentive that doesn’t require a direct financial return.

Calls for Greater Oversight

In the conclusion, the article stresses that a rigorous vetting process and transparent monitoring mechanisms are essential if municipalities want to harness the benefits of growth deals without exposing themselves to unchecked drains. The author recommends:

• Independent Audits: Regular, independent audits of the economic impact of the deal, similar to the audits performed by the city of Atlanta on its previous data‑center projects.

• Performance‑Based Incentives: Tying tax credits and subsidies to specific, measurable metrics such as job creation, wage levels, and community benefits.

• Sunset Clauses: Including clauses that automatically terminate or modify the deal if the company fails to meet agreed benchmarks.

The article concludes with a link to the Ohio Development Council’s “Growth Deal Framework” guide, a public‑policy white paper that outlines recommended best practices. The author also links to an investigative report from the Columbus Dispatch that provides a more granular view of the city council’s internal deliberations.

Bottom Line

The article from 2007 serves as an early cautionary tale about the seductive but perilous nature of growth deals. It underscores that while the promise of jobs and revitalization can be powerful, the risk of an unchecked drain on public finances remains real unless accompanied by careful oversight, clear accountability, and a commitment to transparency. In the years since, municipalities across the country have begun to adopt some of the recommended safeguards, but the conversation remains highly relevant as new growth‑deal proposals continue to surface in the wake of the current economic climate.