Tax abatements vital economic development tool

June 23rd, 2014

News Coverage:

Tax abatements vital economic development tool

Posted: Sunday, June 22, 2014 11:00 pm | Updated: 7:35 am, Mon Jun 23, 2014.

By Terry McDonald, Ron Smith, John Sampson, Larry Macklin and Vince Buchanan

The Northeast Indiana Regional Partnership, LEDO Council, the Regional Chamber of Northeast Indiana and the Mayors’ and Commissioners’ Caucus of Northeast Indiana are compelled to respond to a June 8 column by Joel Elliott entitled “Link between tax abatement, job growth doubtful.”

He referenced a single report as his basis and directive to municipal officials to “Don’t do it” in regard to property tax abatements. We find this report to be misleading, and that, when attracting new businesses into a community, tax phase-in is a very effective tool to mitigate the risk of new operations. Communities who refuse to help manage the high risk and uncertainties of the startup of a new facility will be losers in the highly competitive field of economic development.

Elliott reported the statistic that as much as $8 billion in assessed value is in the process of being phased in over the next 10 years. However, he failed to also mention that the total assessed value in Indiana exceeds $263 billion. In other words, less than three percent of the state’s assessed value is being phased in over a period of 10 or fewer years in support of employers creating jobs and making payrolls, while purchasing supplies, services, and in general, contributing to the economy. In fact, the investment of employers is responsible for sustaining the economic vitality of our communities and residents.

Readers should also be reminded that, when a business applies for tax abatement, that means assessed value is growing; investments are being made in goods-producing capital; and jobs are being retained or created in the community. Every community in Indiana is in stiff competition for jobs, with neighboring states, regions and countries. With some arrogance, we could certainly refuse to use this economic development tool to the delight of our competitive neighboring states. But make no mistake, local tax abatements are a big deal in Indiana as well as every other state that competes with our region for job opportunities.

We agree that tax abatements and incentives are not the objective for employers. Employers seek first a skilled workforce, market access and a reliable supply chain. However, rest assured that the phase-in of property taxes matters to employers that invest millions in new equipment or a relocation that will take years to pay for. Just recently, a major employer announced an $8 million investment to purchase equipment requiring the creation of just 12 new positions. As an employer, wouldn’t you choose to expand or locate in a community that appreciates the significance of this investment and risk?

Certainly, existing companies in our communities make isolated investments without the direct benefit of tax abatements given that the alternative is too costly. Over time, those same companies examine the most cost effective locations to operate and employ local residents. During the great recession, Indiana — and specifically our region — was a disproportionate winner in that analysis as companies sought the best business-friendly communities and low cost options when consolidating facilities. There is no question that unfriendly or unsupportive business climate weighs heavily in these decisions.

Local elected officials, the Regional Partnership and local economic development professionals in northeast Indiana are committed to writing a new story by reversing a decades-old decline and returning this region to a future of growing prosperity.

From the front lines of the jobs war, it is our collective experience that our economic growth depends on our commitment to create and sustain a supportive business environment. Tax abatements are an effective tool to do just that.

Terry McDonald is mayor of New Haven; Ron Smith is a Steuben County commissioner; John Sampson is president and CEO of the Northeast Indiana Regional Partnership; Larry Macklin is on the Adams County Economic Development Commission and Vince Buchanan is executive director of the Regional chamber of Northeast Indiana. They are leaders of the Northeast Indiana Regional Partnership, the Mayors’ and Commissioners’ Caucus of Northeast Indiana and the LEDO Council. For more information see