NEW ALBANY — Tax abatements are often lauded as an economic development tool, or criticized as a form of corporate welfare.
During the process of rewarding and renewing tax abatements, the New Albany City Council and some residents have questioned whether the administration has paid close enough attention to the employment totals claimed by the companies receiving breaks.
According to information requested by the News and Tribune and provided by the city, 52 abatements were received in 2013, with some companies receiving credits for equipment and property investments.
Over the course of their abatements, which are between one and 10 years depending on the stage of the credit, those companies reported adding almost 1,000 jobs.
The standing policy for New Albany has been to award 10-year abatements for property and 5-year credits for new equipment. The discounts are phased over the abatement period, but the credits amount to a 50 percent savings in property taxes.
In order to garner the abatements, companies typically pledge to add jobs.
For the 2013 abatements, with the property taxes to be paid this year, the companies saved $409,815. But only a portion of that, a little less than half according to city officials, would have been distributed to New Albany, as other taxing entities in Floyd County would have received some of those levies.
Also, the New Albany Redevelopment Commission will receive $40,981 of those abated property taxes for awarding the abatements. Those funds are used to support economic development activities for the city.
Business attraction, expansion and retention are the aims of the abatement program, said David Duggins, director of economic development and redevelopment for the city.
“I think it has been extremely successful,” Duggins said of the city’s abatement program. “It has allowed us to retain and expand a number of our businesses.”
Retention is also an important part of tax abatements, as it allows the city to “compete and offer existing businesses an opportunity to stay here in New Albany,” Duggins said.
“We want the businesses that are here to stay here and grow.”
Unlike municipalities in Clark County, New Albany is somewhat land-locked when it comes to property for new industrial growth, he continued. So it’s important for the city to retain its existing businesses, and abatements help with that task, Duggins said.
The city did recently open a 40-acre tract of property at Grant Line Industrial Park West. There were plans for Kemper Foods International to take almost half of that property, but a 2009 state-backed project with the company never moved forward into an executed contract.
Kemper Foods — which doesn’t receive a tax abatement — won’t be expanding from Park East Boulevard into Grant Line Industrial Park West in the near future, but Duggins said the city continues to actively market the site and has received some interest.
Samtec has been one of the biggest successes of the abatement program, as the company reported it has added more than 200 jobs over eight years of abatements.
Globe Mechanical, TG Missouri and VTI of Indiana reported adding about 100 jobs each, and only a few companies showed no job gains as of 2013.
There have been questions about who checks the numbers, and when it’s appropriate to pull the plug on an abatement for a company that hasn’t lived up to its promised job gains.
During meetings in August and September, the council tabled several abatement renewal requests because the forms were incomplete. The abatements had been suggested for approval by the administration, though they lacked information about job totals and other information.
“I think that if we’re going to give somebody a tax abatement, it’s not asking too much to have forms filled out correctly,” said Mark Cassidy, a New Albany resident who has asked the council and administration multiple times to pay closer attention to the abatements they reward.
By signing the forms, the companies are essentially promising that the job totals are correct. But how does the city really know?
“It’s illegal to sign an [abatement] form that’s not correct. That’s also true about filling out your income tax form, but they still do random audits of income tax forms,” Cassidy said.
It would create more public trust in the program if the city randomly audited the abatement-receiving businesses to ensure the job totals they are vouching for are correct, he continued.
“Residents want to know where their money is going,” Councilman John Gonder said.
It’s basically a lack of gratitude when a business submits an abatement form that’s incorrect or only partially filled out, he said.
Gonder supports a more rigorous standard for reporting information about businesses.
Also, if a business doesn’t meet its employment pledge, the council should consider rebuking its abatement renewal the following year, he continued.
“The economy is booming now, certainly relative to 2009, and so the people should be held to a higher standard now than back in the height of the recession,” Gonder said.
The city hasn’t voided any abatements since Mayor Jeff Gahan took office, and it’s quite uncommon for cities to take away a tax cut for a business, Duggins said.
Pulling an abatement could lead to a business closing its doors, and so the city’s procedure has been to meet with companies struggling to match their job levels and assist them instead of ending their credits, he continued.
“No company [in New Albany] has warranted having their abatement removed,” he said.