Jasper commission recommends updates to tax abatement program
Jasper’s Economic Development Commission recommended some changes to the city’s tax abatement program.
Those changes have to be approved by the Common Council and will be under consideration at Wednesday’s regular meeting.
The abatement ordinance was approved in 2011 after the Jasper Action Team — a group of business and community members formed under the Jasper Chamber of Commerce — made the recommendation to implement the program based on their own study of the economic impact it could have on the city. Under the program, companies are able to phase in personal and real property tax payments on new investments for up to 10 years.
Prior to discussing the changes, Jasper Mayor Terry Seitz addressed the commission regarding his view on the success of the tax abatement program.
He explained that since its adoption, $81,753,871 had been invested by businesses expanding or moving to Jasper. This has resulted in 437 new jobs which are estimated to have added about 200 jobs to the local economy in the service industries to support those new jobs.
“I would say that it has been a success,” Seitz said.
The mayor also stated that the program had likely kept at least three companies from relocating outside of the area.
Seitz stressed that the city does not lose money on tax abatement since it only impacts new investments by companies. The view shared by government officials supporting these programs is “but for the tax abatement, the investment would not have occurred,” and therefore, they don’t impact the current tax base.
The commission agreed and chair Andy Seger added that the tweaks they are recommending won’t impact the core benefits of the program. “The substance and intent of the program remains intact and virtually unchanged,” he said. “We believe these updates are appropriate and make the overall program even better as we go through future abatements.”
Among the changes, the commission recommended reducing the length of the abatement available for real property, or equipment, to five years from the 10 years currently available. Seger said the change was recommended since most depreciation on personal property is calculated over a shorter time. Real property taxes will still be eligible to abated for up to 10 years.
They also decided to combine the application and recertification forms into one single form to streamline the process.
Some changes were also recommended in scoring the abatements. With the current program, a business is scored under five main categories; investment, jobs, wage level, infrastructure and the bonus points. The total of that score determines the length and value of the tax abatement.
The commission recommended adding 10 points to the level of the investment category. “Our group feels like we want to reward companies that are investing higher dollar amounts in our community that will ultimately become part of the tax base,” Seger said.
With the increase in points to the investment, the commission recommended increasing the investment amounts for those points. Scoring will begin at the $500,000 investment level and max out at $10 million to receive all 40 points.
Conversely, the commission recommended reducing the amount of points available from jobs and wage categories by five points. Along with reducing the points available, the changes would increase the base wage amounts necessary to be considered for those points.
“While jobs and wage-levels remain very important to our community so is dollars of investment to our tax base,” Seger said. “We feel this leads to a better balance across the categories.”
Wages and jobs will account for a maximum of 50 points available on the scoring and investment will account for 40 points. The remaining 10 point will be based on infrastructure.
Seger said these changes were recommended in recognition that companies are making significant investments in new equipment to remain competitive and relevant in their industries but at the same time, this equipment investment does not incorporate new jobs. He added that under the updated program, job retention will be emphasized.
They also reduced the number of bonus points available since some of those points are based on programs businesses are already incorporating to remain competitive in their respective markets. Those included items like incorporating green practices as well as health and retirement programs.
Points will be reduced from 30 to 15 and be based on using local contractors for expansions. They will also concentrate on companies implementing innovative technologies and diversification that impacts the local business community.
If the council approves the changes at Wednesday’s meeting, final approval on the ordinance changes will occur at the March meeting.
It does affect the City of Jasper tax base, sort of. If the abatement drives growth inside the city, it will raise property taxes if not paired with spending cuts.
Remember, this affects the tax base. The tax base affects:
1. GJSC
2. Dubois county government (including the health dept.)
3. Dubois County airport
4. Bainbridge Township
5. Jasper Library
6. and the City of Jasper.
Like a TIF district, abatements distort the tax base, which drives property tax rates. So, in a non-TIF situation, this means those entities should cut spending so not to raise the tax rate on us. If you didn’t notice, those who don’t live in Jasper, but are within those taxation districts, will see their taxes go up too.
But in a TIF district, this is a double whammy (and in Jasper/HB almost every single abatement took place within a TIF). This will drive up your property taxes for 25 years. Why? Because the TIF will prevent the new tax value to fall into the pool that tax rates use to determine your property taxes. Higher the tax assessed value, the lower your property taxes.
In this case. the only government entity to gain from the increased tax value when the abatement ends is, when inside a TIF is district… the City of Jasper.
So the school will have to provide more services with the same amount of funds, spreading the butter more thinly over the bread (analogy).
Same thing goes for every other government entity listed.
Are abatements bad? Nope. They do drive meaningful expansion. Are they needed in every situation? Nope. Many business can get an abatement even if they were going to do the expansion anyway. How does that happen? The city would do a poor job of investigating if the business really needs it to do the expansion. If not, but gets an abatement anyway, that is called Corporate Welfare (HB has done some of this recently).
So when you read this article, you see some great reforms, but a statement that isn’t the whole story. The whole story ends with your property taxes going higher, and no tax relief in sight. Remember, some of the currently elected local officials thought the income tax was too low. So we should be happy, sort of… and then vote in a way to continue economic expansion without corporate welfare and higher taxes.