By Ken Alltucker
The Cincinnati Enquirer

The chief development officials of Kentucky and Ohio agree that companies shouldn't pit the neighboring states against each another to gain lucrative tax giveaways.

Still, they acknowledge that the two states have no plans to halt such practices or cooperate more closely on specific corporate prospects.

"I doubt we'll get to the point where we'll work together on individual projects," Ohio Department of Development Director Bruce Johnson said Tuesday during the International Economic Development Council convention in Cincinnati. About 1,000 economic development professionals are in town for the convention, which closes today.

One day after Cincinnati Mayor Charlie Luken urged cities and states to stop subsidizing corporate jumps from one jurisdiction to the next, Johnson as well as top development officials from Kentucky and Indiana chatted about the highly competitive nature of regional economic development and the value of incentives in creating jobs. Their conclusion: Cooperation is a pleasant concept but is overshadowed by the high stakes when states battle for the jobs and taxes a new company creates.

"Our short-term strategy is to compete for every project we can get our hands on," Johnson said.

A more likely cooperative scenario could be joint marketing of the Ohio River and other Tristate business advantages, Johnson said. The need to promote the three states is especially urgent as companies move factories and jobs to labor markets in Mexico, China, India and other segments of the global market where operating and labor costs are cheaper.

Regional cooperation has been a hot topic for the city of Cincinnati, which recently approved two controversial aid packages to large corporations.

Convergys Corp. considered a move to an undisclosed Northern Kentucky site before it won a package worth almost $200 million in grants, tax breaks and a loan from Ohio and Cincinnati. Last week, the City Council approved a $12 million parking garage for Kroger, which said it would move to a suburban Cincinnati office building without the incentive.

Kentucky's development cabinet also offered an incentive package to lure Convergys, but Economic Development Cabinet Secretary Gene Strong said it isn't common practice for Kentucky to pursue Ohio companies unless the businesses threaten to leave the region.

He said up to 94 percent of Kentucky's deals come from expansion of existing companies or corporate relocations from outside the Tristate. Few companies move to Kentucky from Ohio or Indiana, but the relocations are highly publicized, Strong said.

"It's not our strategy to raid from one another," Strong said.

Yet he acknowledged that some Indiana- and Ohio-based companies seek incentives from the Bluegrass State to leverage a better deal from their home states. His staff usually can detect whether a company is serious about moving to Kentucky or is merely fishing for a better offer from its home base, Strong said.

"You have to sit across the table (from a company representative) and decide whether you're being used to beat up on Ohio or Indiana," Strong said.

Tim Monger, executive director of the Indiana Department of Commerce, also doubts the three states would share information on competing projects.

Greater Cincinnati isn't alone in development scraps. Cities and states nationwide have found incentives to be a powerful and often-used tool in the war for jobs.

If all factors are equal, incentives have the power to improve one city or state's chance over another.

"Incentives make a big difference," said Eric Geisler, area director of Ernst & Young in Houston.

Geisler, who advises corporations seeking incentive packages, said it's important for cities and states to have well-established programs and clear vision. Some regions tailor tax breaks to target growth of specific industries.

For instance, the Mississippi Legislature approved laws designed specifically to attract a large automotive plant. The strategy paid off in 2000 with Nissan investing $930 million in an assembly plant near Jackson that created an initial 4,000 jobs. Mississippi contributed $295 million to the venture. The factory soon expanded to 6,300 positions, said Jay Moon, president of Mississippi Manufacturers Association.

Yet even after the widely hailed agreement was reached, there were additional hurdles. To deliver a clear site for Nissan within the agreed-upon six months, the state hurriedly negotiated purchase agreements on 174 parcels. Furthermore, an unseasonably wet spring forced state and local governments to spend $8 million to make the site ready for development.

Moon's conclusion: Economic development officials must set realistic goals. "Decide what assets you have control of and what you can put on the line," he said. "There will be a lot of claims that the (project) is corporate welfare."

E-mail kalltucker@enquirer.com