County Council questions tax abatement effectiveness in light of budget shortfalls

County Councilwoman Becky Beckman asked if the county is attracting new businesses to the area or simply bolstering a good old boys club with local companies with the current tax abatement programs?

She also questioned the effectiveness of abatements if they weren’t creating jobs in the area.

A little history:
Indiana has a statute on abatements in which it establishes what types of businesses and equipment can qualify. That includes manufacturing, information technology, research and development and logistics companies. Golf courses, racquetball courts, retail establishments and restaurants cannot receive tax abatements. Municipalities can decide the structure of abatements and adjust them to be more aggressive than the state’s.
In 2011, Jasper’s Common Council approved the city’s abatement ordinance under Mayor Bill Schmitt’s administration. The Jasper Action Team, a subgroup under the Jasper Chamber, developed the ordinance and presented it to the council for adoption.
At the time, Stens was considering moving their headquarters from Jasper to another city offering incentives. The approval of the abatement is credited with Stens remaining in the area and moving to their new location on Jasper’s south side. Indiana Furniture also stepped up and received an abatement on the expansion of their facility just down the road from Stens.
Jasper wasn’t the first to apply a broader abatement process to the state’s ordinance. Ferdinand has had its tax abatement program for at least 20 years. Once Jasper adopted their ordinance, the county and City of Huntingburg adopted their tax abatement ordinances to maintain a county-wide level playing field.

“The trend they are seeing in some cities is these tax abatements are tending to the good ole boy being Santa Claus and handing out candy canes,” she said. “The economic development the tax abatements bring along have to be a win-win-win for everybody. A win for business, a win for the county and above all, a win for the taxpayer.”

Beckman told the county council she would like to expand the county’s tax abatement review committee to include more representatives from the community. Currently, the committee is comprised of the presidents of the county council and commissioners and the county auditor.

She also criticized the scoring process for the tax abatement. In the case of Stens, the company was awarded a 10-year abatement on the $2.5 million investment in the new headquarters and fulfillment center on 1919 Hospitality Drive. Along with the renovations, Stens invested $400,000 in equipment that was included in the abatement.

They were awarded a full abatement for the first eight years, 75 percent in year nine and 50 percent in the 10th year.

Stens scored high on different aspects of the application that included taking over the empty former Columbus Container building, making the large investment in the building and creating 98 new jobs in three years. However, in 2015, the company reported it had not met its employment goals. Only 28 positions had been filled.

Under the scoring guidelines, the company was able to alter its abatement projections and still score high enough to maintain the same abatement schedule.

Beckman also pointed out the $846,000 investment by Texas-based Temple-Inland into a box factory in St. Anthony. The company scored 47 points on the abatement application and received a full abatement for two years, 75 percent in year three, 50 percent in year four and 25 percent the final year. The abatement was on the investment in new equipment and did not create any new jobs.

Beckman is concerned about the loss of income for the county, schools and even the cities as these abatements are put in place. Although many abatements are awarded to incentivize job growth and thus increase the amount of County Option Income Tax and Economic Development Income Tax (both taxes based on employment), with the exception of MasterBrand and Jasper Engines, most recent abatements have not added many jobs or have missed their marks on fulfilling those jobs.

Jasper has the most abatements in place, 16 abatements with 11 companies, and all of them are in the large tax increment finance district the city created in March of last year. So, even as those companies’ tax abatements roll off, the increased assessed value will not necessarily impact the assessed value of the city or the county. The newly created or released tax funds will be captured by the tax increment finance district to be used by the Jasper Redevelopment Commission in the district.

In 2015, according to a sheet prepared by the Dubois County Assessor’s Office, Jasper’s tax abatements amounted to over $41,000 in tax losses for the county; $138,000 for the Greater Jasper School Corporation; nearly $100,000 for the City of Jasper; and the Jasper Library lost about $8,750.

With the county facing budget shortfalls that have increased each year for the past five years, Beckman feels this is something that needs to be considered to mitigate those losses in the future.

She would like to see the council be more scrutinizing of the applications and tighten the abatement process for companies that don’t create new jobs.

Council President Greg Kendall disagreed. “The amount of taxes the county is losing on our own tax abatements is not very much,” he said referring to the three abatements the county has granted.

He explained that the county can’t regulate what the cities do even though the lost revenue does impact them.

Beckman said she understood that but felt the steps were necessary on the county’s part. “We can take the lead on this and we can cut out the stuff that isn’t true economic development. It’s being Santa Claus and giving candy canes out,” Beckman said.

Councilman Nick Hostetter also questioned the process. He thought it would be pertinent to determine if a project is going to move forward regardless of an abatement. “If it’s going to go forward without the abatement and there’s not a great benefit for us to give the abatement, why are we going to give it,” he asked.

Kendall said he was concerned about companies that were expanding elsewhere and not in Dubois County. “The thing is that if they are not here to begin with, five years from now we don’t get anything,” he said. “If you give them tax abatements now, in five years you’re going to get taxes from them.”

Hostetter asked who was going to leave among the three the county recently awarded, but Kendall declined to answer the question.

The county council plans on examining the abatement process in the future as it continues to investigate ways to decrease the budget shortfalls they have had in recent years.

“I don’t want to do anything that hurts future growth and future jobs,” Kendall said.

The council agreed that was not their goal.

“We have to have tighter controls,” Beckman said.

Mayor Seitz submitted a response.