The cooperative effort by city and county leaders to revamp policies for approving tax abatements will bring welcome clarity and improvements to the process. But the upgrades likely won’t lead to a sharp increase in the number of abatements either the city or county rescinds when companies receiving tax abatements fail to fulfill the promises made to obtain the investment incentives.
The Joint City-County Tax Abatement Committee was created last May not only to improve the process but to ensure the city and county policies were more comparable. Both the Allen County Council and the Fort Wayne City Council are scheduled to discuss the proposed changes today.
We wanted to align the scoring systems so that the county was offering the same abatements, and the benefits offered by the county were not out of line with those offered by the city, said City Councilman Geoff Paddock, D-5th, a member of the committee. We also wanted to add this as another layer of cooperation.
The approach ensures the city and county will have more easily understood policies and will use tax abatements collaboratively as an economic development tool to encourage businesses to locate or expand in the community.
One of the first decisions the committee made was to rename tax abatements as tax phase-ins.
The name change may appear a superficial modification, but committee members are hoping it will help clear up public misperceptions about the tax incentives.
Paddock said, There was a lot of feeling out there that we were giving businesses tax abatements without asking them to pay any taxes. When in actuality they are.
Tax abatements do not cut taxes on existing property, but they do delay a company’s increased tax burden resulting from an investment.
Creating a weighted point system for tax phase-ins is the most beneficial of the proposed changes. The point system will consider the size of the business investment, the number of jobs created or retained, and the wages and benefits of those jobs when reviewing tax abatement applications. Those jobs with higher wages will be worth more points, as will those that provide better benefits. The total number of points a company receives determines the length of abatement, from three to 10 years. Companies making large investments that bring in high-paying jobs in growth industries will receive a longer delay before phase-in.
Rather than base this on categories of businesses, base it on the type of jobs and benefits being created, Paddock said. The point is to attract higher-wage jobs that offer benefits. This is one way we can assist in doing that.
In the past, local officials have debated the merits of granting tax abatements to professional service providers, such as medical or dental offices, because of the limited number of jobs created.
The point system should help target higher-quality jobs. But it doesn’t appear the changes will directly address the concerns of tax abatement critics upset that officials don’t rescind abatements when companies fail to fulfill the promises they make when applying for the incentives.
Neither the city nor the county has ever rescinded a tax abatement – despite a bounty of examples of companies that failed to meet stated job creation goals. It’s also rare for an abatement request to be declined.
The proposed change requires businesses seeking tax phase-ins to provide more detailed information about the wages, benefits and types of jobs the company’s investment is supposed to create. Other than that, not much changes to address the compliance aspect, said Elissa McGauley, abatement specialist for the city. We are going to continue to follow the procedures laid out in Indiana Code.
State law has long allowed government bodies to rescind abatements in specific instances, but it doesn’t allow a government body to rescind tax abatements because of a recession.
I’m for tax abatements just like I’m for homestead exemptions, Paddock said. It’s a tool we need to attract jobs and new businesses. But we do have to have some tougher compliance policies to make sure companies are complying. And we think this is a step in the right direction.