Last week, JobsOhio Chief Investment Officer Mark Kvamme revealed during a meeting with Crain's Cleveland Business (subscription to view article required) that the newly created private economic development organization was setting aside its highly touted plan to invest JobsOhio's funds directly in growing businesses to retain them in the state.
The initial plan positioned JobsOhio as the entity that would provide companies with equity, in addition to the state’s traditional loan and grant programs. This method would establish a different type of relationship between the state and the businesses the state wanted to attract and retain.
An earlier article (subscription required) in Crain’s Cleveland Business stated that one of JobsOhio's key selling points was having the state take an equity position in a small, growing business. Instead of issuing a loan, taking a financial stake in the company would have ultimately given the state the chance to share in the success of the businesses it helped fund. This, in turn, would have allowed the state to use its investment gains to expand JobsOhio's incentive programs.
Instead, it now appears that JobsOhio will rely predominately on the existing loan, grant and tax credit programs to encourage business development and growth in Ohio.
Kvamme cited the inherent legal difficulties that could arise in creating an investment vehicle that would allow state money — particularly the liquor profits that will fund JobsOhio — to be used for equity investing. According to the 1851 Ohio constitution, the state is expressly prohibited from investing public money in private corporations. However, Kvamme believes JobsOhio can find others who will make the equity investments that some young companies need.
