Quick Thought On Tax Abatement Reform
Posted by Jeff Pruitt - 4/29/08 @ 6:52 pm - Filed Under City Council, Featured
It seems to me that everyone on city council seems to support tax abatements in general and more specifically for just about any business investment. Yet there seems to be some questions about the application process, applicability to small businesses, etc. Why not streamline the process and allow an abatement for any and all business investment in the city?
The paperwork seems to be burdensome and, in general, completed after the business has already decided to make the investment. On top of that the council (and probably the city) rarely if ever turns down an abatement to begin with. Why don’t we just take the guess work out of the process and eliminate an unnecessary bureaucracy?
If council and the city administration really believe in the efficacy of tax abatements then just give them to everyone and eliminate the headaches and confusion that keep smaller businesses from seeking them. We don’t need bureaucrats rubber-stamping applications - heck we can probably save the city some money by eliminating a few jobs in the process…
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10 Responses to “Quick Thought On Tax Abatement Reform”
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Yes, and we should also make the abatements permanent and 100% each year. What we have currently is a perverted system that (because the abatement decreases each year) actually gives these businesses an incentive to leave the area as time progresses.
I think we should just eliminate all taxes completely. I would suggest that we hold a referendum on this proposal, but there would be no public funds available to conduct the referendum.
There’s just the small matter of state law.
For another year, there IS a 3-year tax abatement program authorized by the state that doesn’t require Council action. A business just files with the Auditor’s Office and gets the deduction. No muss, no fuss. But that program, created by the state, only will exist for one more year unless the legislature extends it. For abatements longer than a 3-year term, state law requires that the jurisdiction’s fiscal body take action.
I’m not saying we cannot improve the process, but one needs to understand the parameters that are outside the city’s control.
Most jurisdictions should consider tax abatement as an entitlement, not for the purpose of “jobs” which, given the economy, few employers can control but for assessed valuation reasons. Tax abatements are generally for plant and equipment, on the margin, so there is little incentive for an employer to leave. The idea, recently expressed by dolts that taxing employers at three times the rate of homeowners is wise public policy ignores the axiom that what you tax you get less of. In Indiana’s case, the 3X will mean an absence of any new employers….
Karen,
I’m assuming “take action” means the fiscal body must approve or deny the request. Seems like the process could still be changed to allow all abatements to automatically go before council and be approved in a sort of block manner.
There are numerous reporting requirements that are mandated by state law. And I’m no lawyer, but I’d be interested in what our attorney would say about an annual “we approve everything that is going to come before us” ordinance. Maybe that would be okay, but it seems questionable to me.
And as someone who has been upset about certain abatements, Jeff, I’m surprised to see you be in favor of no debate at all - or am I missing something?
Karen,
I think tax abatements should be used only for companies that retain or create jobs above the median income level. However, it’s quite apparent that council and the administration do not share that view.
So my thought is if you really believe they work then let’s go ahead and open it up to any and all who want to invest in our city. It seems like a complete waste of money and resources to have someone from the economic development staff compile info from a company and then regurgitate it to council. Let’s just cut out the middleman here and let the council approve the abatements in a more efficient manner.
Also as part of this process we could revamp the application procedure to make it refundable (as Pape mentioned) and much more streamlined.
Think of it as me saying “If you can’t beat ‘em, join ‘em.” But if we’re going to take this approach then let’s make it as easy and efficient as possible and only do the bare minimum as required by state law…
Hi everyone,
The entire discussion about abatements being tied to design guidelines, especially in the core, was interesting. Not surprising that John Shoaff brought this up. Councilman Shoaff has been good at looking at a project from a design viewpoint and taking that into concern.
It still burns my butt over the downtown Subway being given a $450,000 tax abatement for, was it 2 or 3 new jobs? We gave them more considerations than the other businesses that were bought in the Harrison Square area and turned around and let them build a new building setback from the street and with what now looks like 2 huge signs in the making.
I think it an excellent idea to tie the design guidelines adopted a few years ago into the abatements. But, if I’m not wrong, the design guidelines would have to be made part of city code first.
Also, one other point, if you’ll allow me. I think it noteworthy that one of the greatest misconceptions about tax abatements was aired. Tax Abatements phase in taxes a company pays, not taking away taxes or giving the company money. I’ll be the first to admit that when I heard Greg Leatherman state this last night, I first thought, “typical spin!” However, the more I thought it through, he’s exactly right.
We need to realize that the vast majority of companies that come before the council with requests do not have some evil master plan. These companies put themselves at risk by putting up their own money and sometimes even their whole company at risk.
There was some discussion about retail businesses and restaurants not being given abatements. I tend to agree with the restaurants not being given abatements, unless they are something that will greatly enhance quality of life or bring some unique experience to town. A new Subway or McDonald’s? Questionable. Most of these types of business are going to spring up anyway.
Retail? I guess like Mike Sylvester, I’m prejudiced towards the small business owner. They have too much going against them in today’s business world. I was involved with a sb that started a new store location. We explored abatements, but decided against it as it was too daunting a process to go through - and this was an initial investment of $100,000. This is one area that needs immediate help. Small business are the backbone of our community. They are what give it flavor, quality of life and more often than not help their workers out considerably more than the giants out there.
The discussion last evening was stimulating to say the least. Kudos to Tom Smith, and the presenters for an educational evening.
A question for Karen or Jeff or anyone else. Do you see a difference in awarding Tax Abatements now that we have property tax caps in place which means reduced tax revenues for local government?
Whoops! I meant to say that like Mike Sylvester I’m supportive of small businesses, not prejudiced against them. Sorry about that.
Karen,
The three year abatement you are talking about was SUPPOSED to help small businesses and it failed 100%.
When the law came out my partner (wife) and I crunched the numbers and quickly realized that the tax abatement was useless to small business owners and so we did NOT file that form for even one of our clients and let me tell you why.
Our clients would end up paying us a higher fee then the tax savings they would realize.
I did file two of those forms this year for small businesses that we brought on board just this year. In both cases they paid me a higher fee then they saved in taxes…
Another example of a law that intended to help small businesses; however, helped only large businesses.
Mike Sylvester
Karen Goldner - How would Jeff’s “approve the whole bunch” be any different than the Redevelopment Commission’s monthly approval of the “claims” with no discussion - AND A LOT MORE $$$$’s involved!