The newspaper attempted to get answers from the Dayton Development Coalition on its spending, but Jeff Hoagland, the chief executive and president, declined to be interviewed.

Money, power flows to secretive group

Coalition gets millions from taxpayers yet keeps budget, spending private.

A powerful non-profit that receives millions of dollars from taxpayers each year operates in such secrecy that it is virtually impossible to gauge how successful it is in bringing jobs and investment to the region or how wisely it spends the public’s money.

A Dayton Daily News investigation found that $64.5 million in local, state and federal tax dollars since 2004 have gone to the Dayton Development Coalition, the region’s chief private economic development arm, and its two affiliates. Roughly 60 percent of the organization’s revenue during that time came from public sources.

Despite the influx from taxpayers, the coalition does not release its annual budgets, conflict of interest policies or financial statements. The organization does file annual tax forms with the Internal Revenue Service, as all nonprofits are required to do. But those filings do not give an accurate picture of total revenues and expenses since 2004 because of transfers between the coalition and its affiliates and changes in IRS accounting rules, according to the coalition.

The newspaper attempted to get answers from the coalition on its spending, but Jeff Hoagland, the chief executive and president, declined to be interviewed. Hoagland also did not allow any staff members to be interviewed. Instead, the organization responded only to written questions with emailed statements.

“The DDC does not disclose its budgets,” Hoagland said in one of the written responses.

The coalition has grown more powerful in recent years, expanding efforts beyond its focus on developments related to Wright-Patterson Air Force Base. Development projects from throughout the region are vetted by committees overseen by the coalition, and projects at the top of the list stand the best chance for state and federal funding. The coalition also gives millions of public dollars in grants and loans to entrepreneurs and high-tech projects and increasingly serves as an economic development arm for local jurisdictions.

With its 2011 designation as JobsOhio West, the coalition assumes even greater power and has a new source of funding. It is one of six regional partners of JobsOhio, the state’s privatized economic development arm. Local projects needing state or JobsOhio incentives, including tax breaks, must now go through the coalition or JobsOhio directly for consideration.

The process means private groups are much more involved in the state’s economic development efforts. Gov. John Kasich and other supporters have defended the change, saying private non-profits like JobsOhio can move at the speed of business. But critics say there is no evidence these groups are more effective than government entities, and the lack of transparency allows these private organizations to take taxpayer money and spend it without public scrutiny, including the release of audits and open records.

Ohio’s Auditor, Republican Dave Yost, was stripped of his ability to audit JobsOhio annually in a controversial move by the Republican-dominated state legislature, which shielded him from overseeing $100 million in state liquor profits that now flow annually to JobsOhio.

“I urge you to tread cautiously,” Yost wrote in a letter to the legislature at the time. “While there have been no indications of misdealing, the potential for self-dealing or other mischief exists sometime in the future. This office’s audit will help protect against the real possibility of human failings.”

Yost later said he would have input in the hiring of a private company to audit JobOhio’s books.

The Dayton Daily News investigation of the Dayton Development Coalition found exaggerated job claims and a culture of secrecy that raises questions about how open the coalition will be with its powerful new responsibility for job creation. In 2012, the coalition narrowly avoided losing millions of dollars from the state after problems were found in a program that targeted entrepreneurs.

In its annual reports and answers to questions, the coalition paints a positive picture of its economic development results, saying it has “created” more than 4,000 jobs in the region since 2013 and derived a return on investment of $163 for every dollar invested in the coalition over the past five years.

But the Daily News investigation found at least half of the job gains are based on jobs promised but not yet realized, including a Chinese glass company’s plan to bring 800 jobs to the former General Motors assembly plant in Moraine. Tracking the non-profit’s return-on-investment claims is not possible without operating budget totals the coalition will not release.

“The inability to get information is one of the challenges of these groups,” said Greg Lawson, policy analyst for The Buckeye Institute for Public Policy Solutions, a Columbus-based conservative think tank.

“I think they can play a useful role when there is real transparency,” Lawson said. “When they say that there are jobs created, then there should be jobs created. People want to be sure that they’re not getting snowed, and that’s where openness and transparency is key.”

In an e-mail response, Hoagland said, “One thing I hope you realize is that we have been nothing but transparent in responding to your questions. We have spent uncounted hours responding to your questions.”

Hoagland said he gave the Daily News “more information than probably we ever had. I’m not saying that’s good or bad but maybe we didn’t give you enough information in the past.”

The coalition acknowledged that about 60 percent of approximately $93.5 million in total revenues between 2004 and 2012 came from local, state and federal public sources. Private member dues and other non-public sources, which coalition officials declined to reveal, accounted for the other 40 percent.

Chief Financial Officer David Harrison said $8 million in additional state or federal funding was received in 2013, bringing the total taxpayer contribution since 2004 to at least $64.5 million.

The coalition would not release total annual expenses for any year.

The public money flows to the coalition and its two non-profit affiliates, Development Partners Inc. and Development Research Corp. Hoagland said all three have had “clean” audits every year.

“We have put many checks and balances in place to make sure we are accounting for funds with the highest standards and integrity,” Hoagland said. It was not clear from his responses what those checks and balances are or when they were adopted.

The audits he referred to were also not made public.

James Brock, a Miami University economics professor, said a certain amount of confidentiality is necessary when negotiating development deals, but that private groups receiving public money must be transparent with taxpayer dollars.

“It’s people’s money and they have a right to know how their money is being used,” Brock said.

‘I trust those guys’

Now in its 20th year, the coalition has nearly 260 members, about four dozen of which are public entities. The rest are businesses, hospitals, private universities and development organizations. The non-profit’s tax forms listed 27 employees in 2012.

Top officials are well paid. IRS filings show Hoagland received $281,421 in total compensation in 2012, which includes his base pay and bonus as well as retirement, deferred compensation and other non-taxable benefits. He and five other top executives together received nearly $1.3 million in total compensation that year.

The coalition is governed by a board of trustees, most of whom are private sector executives, including Pamela Morris, chief executive of CareSource; Colleen Ryan, president of Vectren Energy Delivery of Ohio; Daniel Curran, president of the University of Dayton; and Julia Wallace, market vice president of Cox Media Group Ohio, which publishes the Dayton Daily News and Springfield News-Sun.

Cox Media Group Ohio is also a coalition member.

Headquartered in the Kettering Tower in downtown Dayton, the coalition has strong support from government officials across the Miami Valley. Several said Hoagland, a former Vandalia city manager, has brought a more collaborative approach since he took over in 2011.

“I trust those guys. I think they do a decent job. I think they work hard,” said Montgomery County Commission President Dan Foley. “I’m going to continue as a county commissioner to invest in them.”

Dayton Assistant City Manager Shelley Dickstein, who handles economic development for the city, said she has monthly meetings with Hoagland yet could count “on one hand” the number of times former CEOs JP Nauseef and Jim Leftwich met with her.

Springfield City Manager Jim Bodenmiller said the coalition has been a good partner.

“We had a concern many years ago that we were kind of on an island over here and often competed with the Dayton region,” Bodenmiller said. “I would venture to say that they saw us that way as well. But we’ve really worked as a team in the last 10 years, particularly under the leadership of Jeff Hoagland.”

Centerville City Manager Greg Horn said that under Hoagland “there’s been an improved, stepped up effort to keep the public sector a little more in the loop.” But if Hoagland moves on there is no guarantee that would continue, Horn said.

Montgomery County is the largest local source of public funding for the coalition, providing nearly $3.5 million since 2000, according to the county auditor’s office. Wright State University is another large funding source, paying the coalition $689,212 since 2005 for dues, contracts, promotions and outreach.

Local officials say the coalition provides a crucial regional approach to development, helps the region speak with “one voice” when seeking state and federal funding and plays a vital role in helping protect Wright-Patterson and Springfield Air National Guard Base from cutbacks.

For years the coalition has led local officials on the annual “fly-in” to meet with the region’s Congressional delegation and defense officials in Washington, D.C., where coalition Vice President for Federal Government Programs Michael Gessel staffs an office.

One of the coalition’s big wins occurred in 2005, when it helped fight for new military missions at Wright-Patt during the federal base realignment and closure (BRAC) process.

“They are the keepers of relationships with Wright-Patterson Air Force Base,” Dickstein said. “They’re the only economic development organization that has the staffing expertise to be able to truly understand what is going on inside the fence.”

Projects to assist entrepreneurs and promote aerospace, defense and other high-tech industries drive much of the state money flowing to the coalition.

Harrison said the coalition used $35.4 million of the state and federal money for grants or loans to public jurisdictions, universities, organizations and companies for economic development. He said $14.6 million, or about 29 percent, was spent on “external and internal services” to perform work required by the funding awards.

Lisa Novelli, president and CEO of the National Composite Center, an incubator for more than two dozen entrepreneurial companies, said the coalition has been a boon to companies needing a boost to get into the market. She estimates that every company in the center has had some involvement with the coalition, either through direct funding or other assistance. The coalition also assisted the center itself with grants and services.

“I don’t have anything but good things to say (about the coalition),” Novelli said.

Wins and losses

Like much of the nation, the Dayton-Springfield region got hit hard by the bad economy. In 2009, unemployment reached 11.1 percent in the 12 counties covered by JobsOhio West. Major employers like General Motors, NCR and United Parcel Service have left town in the last decade while others, like Delphi, dramatically reduced employment.

Since 2004, the Dayton-Springfield region lost 37,600 jobs. Although the economy has improved, the region still had a net loss of 700 jobs in 2013, according to the most recent Ohio Labor Market Information data from the state.

Even as the region struggled, the coalition worked with state and local officials to score some impressive wins, including the just-announced Fuyao Glass Industry Group plant planned for Moraine, General Electric EPISCenter in Dayton, WilmerHale law firm in Kettering, and Code Blue in Springfield.

But there have also been some recent disappointments, including the coalition’s unsuccessful effort to win federal Unmanned Aerial System testing designation for Ohio and Indiana, which officials had hoped would spur job growth here.

The coalition used at least $1.5 million of taxpayer money to pay a Virginia consulting firm, Strategic Growth Partners Inc., to prepare a proposal to the FAA, which announced in late December that six other sites were picked.

All told, the state gave the coalition nearly $3.7 million for UAS, including the drone proposal.

Coalition officials have shrugged off the defeat and say it won’t deter the region’s efforts to boost the UAS industry.

Exaggerated claims

Some of job gains touted by the coalition have yet to come true.

The coalition’s primary method of communicating results to the public are its annual reports. But those reports have no uniformity in reporting data for jobs, wages and investment, making a year-by-year comparison impossible. The 2013 report is a tri-fold brochure rather than the more detailed report issued in other years.

“Each year we vary the format, content and style in an effort to provide a fresh, innovative presentation to our stakeholders,” Hoagland explained.

The most striking claim in the annual reports is the statement that the coalition has created nearly 10,000 new jobs since 2011.

Just since 2013 the coalition “created” more than 4,000 jobs, and “generated” $149 million in new payroll and $613 million in capital investment in 14 area counties, according to Hoagland’s emailed answers to the newspaper.

Hoagland’s numbers, however, include estimates of jobs, payroll and investment that may eventually happen but do not currently exist and are not guaranteed. Companies do not always meet job pledges made while persuading public officials to give them tax breaks, grants and other help from taxpayers. The region has watched as multiple companies helped by taxpayers either never created the promised jobs or shuttered operations.

More than half of the created jobs claimed on a list of 4,247 provided by Hoagland are associated with the Fuyao Glass Industry Group windshield factory proposed for the former GM plant in Moraine and an unnamed company’s distribution center being constructed in Union by California developer Prologis. The coalition job claims also include companies identified only by project name: Project Spooky in Mercer County, Project Press in Springfield, Project Owl and Project Buzz.

When pressed on the jobs and investment claims, Hoagland acknowledged the coalition’s numbers are estimates of future jobs and he doesn’t know how many have actually been created.

“We say that JobsOhio West created new jobs and new payroll because that is the standard way that JobsOhio and economic development organizations throughout the country track and report success,” Hoagland said.

That is exactly the problem, said Greg LeRoy, executive director of Good Jobs First, a non-profit that bills itself as a non-partisan group that promotes accountability in economic development.

“This exaggerated jobs claim problem is a recurring theme that we found in the privatized agencies,” said LeRoy, whose group studies privatized state development agencies like JobsOhio.

He said the lack of transparency in these groups and the practice of claiming success for jobs that don’t exist make it hard for the public to determine if these public/private development efforts are doing a good job and spending taxpayer money properly.

“To us it’s a recipe for mischief,” LeRoy said.

Horn, the Centerville city manager, said he is “always suspect of job creation statistics from any organization because organizations have to self-promote.”

Montgomery County Administrator Joe Tuss said he doesn’t have a problem with how the coalition calculates its numbers. Nor does he believe that the non-profit should be held accountable for job losses in the region.

That loss is primarily related to the automotive industry, Tuss said, and part of economic trends that are beyond control of local or state officials or the coalition.

“The reality is those jobs were going to go away,” Tuss said. “Our contract with the coalition wasn’t to save automotive jobs. It was to move forward with an economic development strategy that was going to focus on (aerospace, materials and manufacturing, health care and) continuing to work to maintain Wright-Patterson Air Force Base as a strong job base.”

The county, however, tracks job creation much differently than the coalition.

In monitoring county-funded projects, Tuss only counts actual created or retained jobs when determining if companies have lived up to their pledges.

One company that didn’t, Kurz-Kasch, pledged in 2008 to create 200 jobs in Miamisburg by consolidating operations from other states.

The coalition’s annual report that year touted the development as a win and counted the 200 as “new jobs.”

A 2013 county report gave a more accurate accounting.

Actual job creation by Kurz-Kasch: zero, the county report said. “Company no longer in Miamisburg.”

‘Deficient in several areas’

An examination of the coalition’s funding from an Ohio Third Frontier program for entrepreneurs shows an average of $24,000 was spent on each job created or retained. While the state’s independent evaluator found that to be in line with the state average, the evaluator recommended pulling the funding because of deficient performance by the coalition.

“They lag their peers in many key areas,” including the number and quality of clients engaged, the evaluator wrote.

Losing the funding would have been a big blow. Of the $50 million the coalition received from the state and federal government between 2004 and 2012, $15 million came from the Ohio Third Frontier program, which targets technology-based economic development initiatives.

The dispute was over the coalition’s Entrepreneurial Signature Program (ESP) designed to support entrepreneurs launching high-tech businesses. The newspaper’s investigation into that program also found discrepancies between the job numbers the coalition reported to the state and what the public was told in annual reports.

According to the state records, the program created or retained 375 actual direct jobs with an average salary of $54,719 from 2007 to the second quarter of 2012. This was considerably below the coalition’s claim in annual reports for 2011 and 2012, which said 491 “direct” jobs were created or retained.

Hoagland said the “presentation in the reports could have been better” and that the number of actual direct jobs through 2012 was 454, reflecting growth that occurred after the second quarter data was reported to the state.

The coalition’s performance in the program was “deficient in several areas,” according to the evaluator, Invantage Group of New Albany, Ohio. Invantage reviewed ESP proposals made by development groups from Dayton, Cincinnati, Toledo, Cleveland, Columbus and Athens regions, and recommended that the state reject the Dayton and Toledo requests for new money.

In the Dayton region, there was limited evidence of companies progressing to commercialization, and “several companies” closed or left the program, according to the evaluator’s report. Average salary reported for the created jobs in Dayton was second lowest of the six regions, with only the Athens program netting a lower average salary.

“There are several mentions of military-related research, but few client opportunities to show for it,” the evaluator wrote.

Coalition officials appealed to the Third Frontier Commission, which overruled the evaluator and awarded the requested $4 million to the Dayton group.

“The discussion gave us an opportunity to better understand the needs of the Third Frontier Commission and we were able to fine-tune our approach,” Hoagland said.

In its most recent quarterly report to the Ohio Third Frontier Commission, the coalition said that since the fourth quarter of 2008, during which the coalition received millions of dollars from the state, 990 entrepreneurs and companies were “briefed” on the ESP program, and development services or investment were provided to 96 clients.

New stature

The coalition’s new status as one of six regional partners of JobsOhio provides a new source of income for the coalition.

The state paid the coalition $3.3 million for JobsOhio work through 2013. A 2014 contract with additional funding is being negotiated with JobsOhio.

“We’ve been happy with what (the coalition) has done,” said John Minor, president and chief investment officer for JobsOhio. “They’ve worked well with us. We believe they work well with their locals.”

But at least one local official, Greene County Commission President Bob Glaser, said he is not happy with some of the decisions made by the coalition’s prioritization committees.

Glaser lauded the coalition for its support of Wright-Patt but said the prioritization process needs to be revamped to establish better metrics to evaluate projects on their merits.

He said some projects rise on the priority list because of political considerations or a desire to reward certain communities.

“We can’t play politics with this money,” he said.

Publicly-funded private development organizations “need to be careful that they are not representing the interests of a handful of real estate developers, or a small number of financial interests or a handful of defense contractors,” said Jeffrey Finkle, president and chief executive of the International Economic Development Council.

Finkle would not directly discuss the coalition, which is among the 4,300 public and private economic development professionals represented by his Washington, D.C.-based group.

But Finkle said groups like the coalition must be transparent and avoid conflicts of interest.

“If they are operating with public money they need to be serving the public first and foremost,” he said.

Staff writer Barrie Barber contributed to this report.

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