FORT WAYNE, Ind. (Indiana’s NewsCenter) – Fort Wayne City Council and Allen County Council are partnering to improve economic development and improve their tax abatement policies.
City Council normally doesn’t meet on the fifth Tuesday of the month, but a special session was held Tuesday night to discuss the future of their tax abatement policy, something County Council members claim they’ve been discussing as well. Tax abatement can be a confusing topic for some, but it greatly affects the economy and "everyone." In the past, council has granted abatements to almost all businesses that qualified—and they feel that should change.
“This was a great opportunity to proactively talk about our tax abatement policies without therer actually being a business’ welfare on the line,” said Councilman Russ Jehl (R – 2nd District).
Tax abatement is a tax break given to new businesses on their property taxes. Instead of paying taxes right away, new businesses have their taxes deferred or have a percentage of their taxes phased-in over a span of 10 years. This allows businesses that extra revenue at first to get their business up and running.
The partnership between councils came about when Larry Brown, County Council President, suggested forming a sub-committee to compare policies to see if the city and county are working together or against each other. Both councils support economic development and agree that tax breaks are key in attracting new businesses. However, they feel abatements should not be used as a reward and therefore create stricter qualifications. Until recently, City council members feel they've been too generous in granting tax benefits. Council talked with business owners, economists, and labor/employment organizations on how to make the current tax abatement policy better.
“Our staff, who is normally taking our policy and then executing that, we actually asked them come and tell us what we can do better. Tell us what policies they see everyday that aren’t working that we can make better,” Jehl said. “We heard a very good story from a prominent businessman who explained how the tax abatements are the difference between a business getting off the ground and business not actually locating in Fort Wayne [because of the abatements].”
Those suggestions from City council’s staff include making policies, programs, and services offered clear and understandable for prospective businesses, knowing all the details of new businesses and their competitors, and adjusting the point system to tighten compliance standards.
“Are there types of abatements that we're giving that are more of a gift rather than a real incentive tool?” said Jehl. “The other thing discussed was whether or not we're giving abatements that last longer than actually useful in attracting those businesses.”
From listening to the forum, Jehl says he also had some suggestions:
• Explore ways to make the ineffective back year abatements less frequent, generally the front years are what counts in helping businesses off the ground.
• Reduce abatements to professional services, such as medical offices, unless the City is in a regional competition for the business.
• Limit the cost to benefit ratio of abatements and abatement data.
Neither City nor County council members plan to eliminate tax abatements, but they want to change how and which businesses should receive them. In 2008, City council created a point system that ranked businesses, making some eligible for more benefits than others. Last December, they approved "super abatements" which extended the amount of time businesses could go without paying property taxes on their investment.
No changes were made to the policy just yet, but Jehl says he hopes to implement one by the end of the year.
“This was simply a good first step that we were able to start the conversation, and there should be additional steps taken up, and that will be a larger discussion with [the councils].”
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