The American Greetings Corporation, based in Brooklyn, Ohio, was founded in 1906 by a Polish immigrant selling cards from a horse-drawn cart. Diebold has been operating in Ohio since 1859, when it was founded by Charles Diebold to make safes and vaults for banks.
Two very different companies that took two very different routes to success in Ohio. Sadly, the latest chapter in the history of both companies finds their paths intersecting with John Kasich’s folly and the tragedy of JobsOhio.
And the recent problems at both companies – including a new announcement of massive layoffs at American Greetings – may turn into one of the largest indictments of the failure of John Kasich’s leadership of Ohio.
Here’s a quick timeline of events…
May 2009: Brooklyn, Ohio residents vote to increase the city’s personal income tax by .5%.
January 2010: Diebold executives, citing the personal income tax, announce to employees that the company is considering relocating the company to another state or city with lower taxes.
November, 2010: John Kasich is elected Governor of Ohio. The day after the election, John Kasich visits American Greetings to discuss incentive plans. It’s literally one of his first acts as Governor-elect.
February 2011: Governor Kasich has the Republican legislature fast track legislation to create a massive, fifteen-year long refundable “Job Retention Tax Credit”. The new law allows for the possibility that a company could actually receive more back that it ever paid in taxes.
March 2011: Governor Kasich signs HB 58 to create the tax credit into law at American Greetings headquarters, where Kasich boasts that he kept the company in Ohio (even though it was only looking at two sites outside of the state, both in Chicago, an area hardly known for low taxes). American Greetings gets an incentive package worth over $90 million.
April 2011: Kasich announces a $56 Million incentive package for Diebold.
Kasich cites the quick deals he made with Diebold and American Greetings as “early success” stories of his administration’s handling of the economy.
Two months later, American Greetings gives its CEO an 18% raise while the media starts to question whether Diebold was serious about moving out of Ohio, or was simply playing the economic incentives game.
February 2012: American Greetings announces 300 layoffs.
At the time we noted how the Diebold deal explicitly permitted that company to keep the incentives even if it reduced its Ohio workforce by no more than 20%. And we warned of American Greetings:
“How much do you want to bet this isn’t the only downsizing announcement we’ll hear from American Greetings before it’s all said and done?”
October 2012: Diebold announces it was scrapping the new corporate headquarters campus, despite receiving a $55 million incentives package from the Kasich administration to essentially construct the facility for free. The obvious, although unconfirmed reason, for Diebold to pass on a free corporate campus was that merely a year after accepting the package, the company had laid off, or was in the process of laying off, so many employees in Ohio that it could not legally keep the incentives any longer. Without the state incentives, the company could no longer justify the cost of its planned, new, very expensive corporate campus.
November 2012: The very next month, American Greetings also announces that it is scrapping its plan to build the new corporate campus as part of its nearly $100 million incentives. They announce that the change has to do with the fact that American Greetings executives were more focused on taking the company private. It still didn’t stop JobsOhio from running ads where the CEO of American Greetings praises John Kasich and JobsOhio:
January 2013: In the face of the collapse of American Greetings and Diebold deals, which Kasich had been touting for two years as his crowning economic achievements, the governor now publicly declares he will not be duped by companies threatening to leave the State of Ohio… for those Ohioans not aware he’d already been duped multiple times.
Despite the supposed change in focus, JobsOhio continues to report that over 75% of its jobs claims are tied to pledges to retain jobs already in the state.
Last Month: Diebold announced another 700 layoffs.
Last Week : The Cleveland Plain Dealer reports that American Greetings quietly laid off over 2,000 employees last year, according to their annual report. The layoffs allowed the company to report $47.7 million profit in the fourth quarter, which accounts for 96% of the company’s revenue for the entire year.
American Greetings and Diebold – two Ohio companies who received huge incentive packages to simply retain their existing jobs – were two spectacular failures in Governor Kasich’s economic development efforts. Despite that, JobsOhio continues to spend most of its time doling out dollars to Ohio companies for jobs that already exist, instead of creating new jobs.
We’d like to know why.
Unfortunately, we are not privy to any informtion about the formula Kasich and JobOhio use to evaluate projects because they claim is has to stay a trade secret.
But we do know this: Whatever economic ouiji board JobsOhio and Kasich claim to use, it supposedly told them that Diebold and American Greetings would be wise investments, and the companies would follow through on their promises. It also told them the state should offer up $400 million in incentives to attract Sears to relocate its HQ to Ohio, even though most market analysis believed the company was primed for bankruptcy.
As far as we know, this same formula has been used to evaluate every project JobsOhio chose to act (or not act) on, and it’s still being used today. If JobsOhio could get Sears, Diebold, and American Greetings this wrong, what’s to say that it’s not making the same mistakes on the other projects too? Or that JobsOhio may have failed to act on projects it should have invested in?