Regional Economic Growth Report
This report contains the results of an analysis of data from the Cincinnati USA Partnership’s 2006 Capital Investment Survey. The analysis was performed by the Economics Center for Education & Research (Economics Center), a unit of the College of Business at the University of Cincinnati.
The first section describes how “Cincinnati USA Growth Businesses” are defined, presents the 2006 survey findings, and compares 2006’s economic impact results with results from 2005 report. The second section of the report presents the economic impact results of the capital investment survey by business type, state, and county. The third section of the report explains the key assumptions used in this analysis.
A. Cincinnati USA Growth Businesses
The Cincinnati USA Partnership surveyed the businesses in the Cincinnati USA1 region to determine total business investment in the region during 2006 and the new and retained jobs associated with this investment. The following analysis examines the results of businesses that added or retained jobs, added investment or added square footage in 2006. This group of 218 businesses is referred to as Cincinnati USA’s “Growth Businesses.”
B. 2006 Survey Results
The Cincinnati USA Partnership identified 218 “Cincinnati USA Growth Businesses” that
added or retained jobs, added investment, or added square footage in 2006.
Investments in the office/service sector were the most significant investments in business investment during 2006 (50% of total investments), along with the manufacturing sector (21%). Among counties, Boone, Kenton and Warren showed substantial increases in investment during 2006 compared with 2005.
The total economic impact of 2006 capital investment by Cincinnati USA Growth
Businesses is $3.94 billion. Of this, $1.14 billion will enter the homes of Cincinnati USA workers in the form of wages. The economic boost created by business investment and employment will support 33,016 jobs in the Cincinnati USA region.2
In 2006, investment by Cincinnati USA’s Growth Businesses totaled $2.06 billion and directly accounted for 20,141 new and retained jobs. One job was either created or retained for every $102,262 in investment spending by the Growth Businesses.
In 2006, 50 percent of total investment occurred in the office/service industry (24% in 2005), 21 percent in the manufacturing industry (23% in 2005), 13% in the distribution industry (10% in 2005), 10 percent in the bio-medical industry (41% in 2005) and 6 percent in the hotel industry (less than 1% in 2005) In addition, less than 1 percent of total investment occurred in research & development which was close to the previous
According to the survey of Growth Businesses, a total of 10,907 new jobs resulted directly from investment and 9,234 jobs were retained. Of the total 20,141 jobs that were created or retained, 35 percent were in the office/service area, 30 percent were in distribution, 24 percent were in manufacturing, 8 percent were in bio-medical, 2 percent were in research & development and 1 percent were in hotels. These jobs paid $844.1 million in household earnings to Cincinnati USA workers.
Close to 79 percent of the new investment in 2006 originated from Ohio businesses, 19.3 percent was produced by Kentucky businesses, and 2.2 percent came from Indiana businesses. The five counties with at least $100 million of investment in 2006 were Hamilton County with $696 million in new investment, Warren County with $326 million, Butler County with $559 million, Kenton County with $248 million, and Boone County with $151 million in new investment.
Of the $2.06 billion total investment, 34.9 percent came from expanding businesses, 33.7 percent from capital investments and 26.4 percent from intraregional relocation. New businesses contributed 5.1 percent to the total investment.
As a result of the business investment and new jobs created by these businesses, local government revenues from sales, personal income, and real property taxes are expected to be $27.2 million and state government revenues are expected to be another $46.7 million.
C. Investment and Employment Trends in Cincinnati USA
The total economic impact of 2006 capital investment in Cincinnati USA was $3.94 billion. This was 8.9 percent lower than the $4.43 billion capital investment impact of 2005. This reflects both the regional and national economic conditions. The impact on jobs decreased similarly, as total jobs decreased to 20,141 from 27,134 in 2005. The economic impact of employee earnings decreased to $1.14 billion from $1.28 billion in 2005.
Overall, the level of investment from Cincinnati USA Growth Businesses decreased by 7.2
percent between 2005 and 2006, from $2.22 billion in 2005 to $2.06 billion in 2006.
Three counties showed dramatic growth in their levels of business investment. Two Kentucky counties showed the greatest percentage increases: business investment in Boone County increased from $65 million in 2005 to $150 million in 2006, and investment in Kenton County went from $150 million to $248 million. An Ohio county showed the greatest dollar increases: business investment in Warren County increased from $207 million in 2005 to $326 million in 2006.
The office/service sector proved to be an important sector of the local economy, accounting for 50 percent of all investment by growth businesses in 2006.
The amount of investment spending associated with a new or retained job was $102,262 in 2006, an increase from recent years. This increase in investment is particularly notable given that it occurred in a period of rising interest rates.
In 2006, Growth Businesses created a total of 10,907 new jobs resulting directly from investment and retained 9,234 jobs. In 2005, Growth Businesses created a total of 10,551 new jobs resulting directly from investment and retained 14,857 jobs. Overall, jobs created and retained with 2006 capital investment were 20.7 percent lower than the 2005 level.
Of the total 10,907 new jobs linked with 2006 investment, 36 percent were in the distribution (15% in 2005), 35 percent were in office/service (27% in 2005), 15 percent were in manufacturing (23% in 2005), and 14 percent were in bio-medical (31% in 2005). Less than 1 percent of new jobs were created in R&D facilities (less than 1 percent in 2005), and 1 percent in the hotel industry (less than 1 percent in 2005).
In the distribution of retained jobs linked to 2006 investment (not pictured), 36 percent were in manufacturing industries, 34 percent in office/services, 23 percent in distribution, and 4 percent in R&D.
D. Fiscal Impacts of Cincinnati USA Growth Businesses
Hamilton and Butler County jurisdictions will derive the largest shares of local tax revenues.
Total state government revenues will be $24.7 million and the local total will be $21.4 million.
1 Cincinnati USA, sometimes referred to as Greater Cincinnati, is the 15-county Metropolitan Statistical Area (MSA) designated by the Office of Management and Budget. (See Assumption 1 on p.18.)
2 The total economic impact of Cincinnati USA’s Growth Businesses’ investment includes the direct impact and the multiplier effects of the investment spending, and the direct impact and multiplier effects of the employee earnings whose jobs were created or retained due to the investments.