I’m spending a lot of time at City Council meetings these days trying to understand the reasons behind their decisions. A couple of weeks ago, just before Christmas, the council made three decisions on an issue that continues to confound me. Why do we repeatedly give tax breaks to area businesses when they decide to move, build or expand here? This letter is about tax abatements and I know tax policy can make peoples’ eyes glaze over but stick with me because I think this issue hits all of us in the pocketbook.
Here’s what happened: The City Council decided, unanimously, to give tax breaks to three businesses:
- Applied Intelligence Corporation, a small (10 employee) manufacturing firm, wants to move its headquarters here from Indianapolis and build a building on an empty lot on Pleasant St. near Union Chapel Road.
- Rockstone Investments, a small (10 employee) Noblesville builder currently renting space on Cumberland Road, wants to construct four buildings on an empty lot on Endeavor Drive, just off Cumberland Road, for its headquarters and for income property.
- Gaylor Electric, a large (hundreds of employees locally) electrical contractor with a 10 year old Noblesville facility wants to build a new building on an empty lot next to its current building just off Pleasant Street east of SR37.
All three asked the city to abate their property taxes on the new construction; that is, forgive a certain percentage of their property tax for a certain number of years. In all three cases, the discount starts at 80% and over time diminishes to zero. The range of time varies from 3 years for Applied Intelligence to 10 years for Gaylor.
All three petitions quote a state law that authorizes the Council to grant these abatements if the new development is in an “economic revitalization area,” which “must be a geographic area which…has become undesirable for, or impossible of, normal development and occupancy because of lack of development, cessation of growth, deterioration of improvements or character of occupancy, age, obsolescence, substandard building or other factors which have impaired values or prevent a normal development of property or use of property.”
You can see what the purpose of this law is: the legislature is giving local communities a tool to help revive property that has become “undesirable” over the years for any number of reasons. The problem here is that all three of these proposals involve virgin land in areas that are among our MOST desirable. None of the parcels is distressed in any way. So, how can our City Council justify giving away taxpayer dollars like this in direct conflict with this law?
The resolution goes on to say that “citizens of the City will benefit from the retention of permanent jobs, expansion of the property tax base, and protection of private investment…” but we already have more jobs here than people to fill them, expansion of our property tax only helps us if we can actually collect the taxes, and I have no idea how this “protects private investment.” A more accurate term would be “subsidizes private investment.”
It’s not like we don’t need the tax revenue. We all pay a $10 trash fee every month on our sewer bills because our city leaders couldn’t find the money to do routine maintenance on our streets a few years ago. We continue to pass referenda to finance our schools because our property taxes don’t get the job done. Tax dollars are precious and ought to be spent where they benefit the most people. Seems to me these tax dollars are benefiting a very few people.
Our mayor and council have been handing out these abatements like candy for years. The council doesn’t even question it; they just rubber stamp every request. I don’t know what the cumulative effect of this is, but I have a request in to the city for a report that explains how much tax revenue has been abated and how much revenue we give up each year. I’m afraid its millions but I’ll wait to see the figures and let you know what I find out.
It’s tempting to think this is just a necessary cost of luring business to our city. Our economic development folks insist businesses will pack up and leave if we don’t pay them to stay, or won’t expand unless we give them an incentive to do it, or won’t move here unless we help pay for their new building.
But I don’t believe it. Businesses can and should expand or move on their own. They don’t need this subsidy; we’ve simply trained them to come feed at the public trough by opening the public purse too readily.
I don’t blame the businesses for asking. It’s good business to seek every financial advantage available and when you see others doing it, it’s simply too tempting to pass up, even for conservative business people who may be philosophically against this kind of corporate welfare.
But I do blame the current administration and council, because they are guilty of favoring a few businesses who are willing to ask for a handout over the Noblesville taxpayer, who is currently paying some of the highest taxes in the county and a trash fee on top of it.
Enlightened economists continue to insist that these incentives don’t work for the common good, but enrich a few businesses, who in turn enrich the politicians who make it happen. It’s a nasty cycle that needs to stop, but until you and I put an end to it, we can expect more of the same.
I’m trying to bring some accountability to City Hall, to change the dynamic so these decisions benefit more than just a few well-connected business owners. I want City Hall to start working for YOU, and I need your help to make it happen.