Council OKs tweaks to tax breaks

By Dave Gong | The Journal Gazette

Some local service industry businesses will no longer be eligible for tax breaks under changes unanimously approved Tuesday by Fort Wayne City Council. 

The new rules, proposed by Councilman Russ Jehl, R-2nd, eliminate property tax abatements for businesses that export less than 25 percent of their services outside Allen County. The change mainly affects businesses such as doctor and dentist offices, local insurance companies, architecture and legal firms, Jehl said, where the client base consists mostly of Fort Wayne and Allen County residents.

Abatement rules for manufacturing or other industries where a large percentage of the services rendered are exported to other communities were unchanged. 

“Our goal should be to create a stable, predictive, business-friendly environment and we do so by offering tax abatements to footloose businesses, where we are in competition with literally every other community in the world,” Jehl said. “But be much smarter with businesses that are not footloose.”

The policy also changes the length of tax abatements from one to two years for businesses that want to move into vacant buildings, Jehl said, unless the buildings are in an economic development target area or have reached an age where they are functionally obsolete.

Councilman John Crawford, R-at large, who is also a physician, supported the changes. Crawford consistently votes against tax abatements for service-provider businesses like doctor's offices and law firms. 

“A small service-provider office like a dentist, a doctor, an architect or a lawyer, if they're doing all their business here in Fort Wayne, they're coming basically to service the people here. They're not going to go somewhere else,” Crawford said. “I think it's only fair and courteous to them, if the majority of the council is going to vote against those, not to have them waste their time and money to come down here just to get turned down.”

However, the amended policy does carve out some exemptions, including for investments more than $5 million. Additionally, the changes also do not touch exemptions for businesses in any of the city's economic development target zones, Jehl said. For example, should a doctor's office want to open on the city's southeast side, the council would consider an abatement request for that project. 

“We would still give a full 10-year abatement, as we currently do, to south-side investment or other areas that are in need of those types of investments,” Jehl said. 

Jehl's changes also tweak the wage scale regarding employee salaries in the existing tax abatement ordinance. The updated policy indexes the scale to grant better incentives for higher-paying jobs, Jehl said. Thirty percent of the entire point-based scoring system for abatement applications depends on the wages offered to employees.

“If you read the wage scale the way that it is, it actually, as wages go up, is a disincentive. It rewards low-paying jobs,” Jehl said. “What we've done is we made sure that we moved the entire scale up to reflect the real gains that we've had.”

Under the amended policy, employers will have to pay their employees about $5,000 more per year than before to receive the same number of points on their abatement application, Jehl said. That change applies to abatement applications across the board.

The amendment approved Tuesday was developed through consultation with the Allen County Council and Greater Fort Wayne Inc., Jehl said, adding that County Council President Larry Brown supports the move. There are plans to introduce similar changes at the county level, Jehl said.

Greater Fort Wayne Inc. also supports the policy change, John Urbahns, the organization's executive vice president for economic development, told the council Tuesday. 

“If we can continue to have a policy that we can accurately go out and meet with businesses and talk about what does and does not fit your policies, it helps us make sure that we're giving them the right advice and bringing projects to you that you are interested in seeing,” Urbahns said.