Monday, July 23, 2012

Incentive Targets High Wage Jobs

From a Lengthy Article by Benjamin Lanka in the Fort Wayne Journal-Gazette:

Tax abatements have drawn heavy scrutiny recently as city and county leaders debate the appropriateness of the incentive for certain developments.

Yet a separate incentive that offers direct payments to local companies for providing high-paying jobs has received barely a look.

Since 2009, Fort Wayne has committed nearly $2.4 million of its income tax revenues to the grant program, and Allen County is examining four new deals worth a combined $900,000.

City and county economic development experts said the program provides another way to entice major employers to locate here. Even typically conservative elected officials said the program is a benefit, even if it makes them uncomfortable.
...

To be eligible for the program, a company must be considering a project in the area that will create or retain jobs. Additionally, that project must be competitive, meaning the company has other places in the nation to invest the money.

It also must meet two of three secondary criteria: It will create jobs that exceed average private wages in Allen County; it is a business in one of six cluster industries; or it is a project with at least $5 million investment or it will create or retain at least 100 new jobs.

If a company with a building or expansion project meets those criteria, it earns points for the average wages of employees and other factors to determine the size of the benefit. The wages paid by the company is where a company can earn the most points – meaning a longer benefit.

Royse said this is intentional to battle not only the problem of falling wages, but also the concerns of local property tax caps. He said there are no caps on income tax revenues, so there is an interest in helping create as many high-paying jobs as possible to generate more revenue for local governments.

In effect, the program offers companies a reimbursement of the local income taxes from the jobs their project is creating or retaining. For new jobs, the company is reimbursed more than for retained jobs.
For example, if an eligible company’s project created new jobs with $1 million in new salary, it could receive a $7,000 benefit. A company simply retaining that payroll would receive a $3,700 benefit. The number of points the project earned is the number of years that benefit is paid.
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Seventeen such projects have been found worthy of receiving this benefit from the city or county since 2009. Those awards are worth nearly $3.5 million in reimbursed income taxes – not including the earlier Goodrich agreement. Of that total, $2 million was dedicated to General Motors, split evenly between the city and county.
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See the full article here:

http://www.journalgazette.net/article/20120722/LOCAL/307229946/0/SEARCH