A tax-incentive request by a former Fort Wayne City Council member could highlight an ongoing debate about whether the city ought to tighten its standards for firms that want tax breaks.
Former Democratic councilman Tim Pape, who is managing partner of the Carson Boxberger law firm, says the firm will likely ask for reduced taxes on new information technology and other equipment when it moves into the downtown Harrison building, an $18 million commercial and residential development set to open in early 2013.
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Tax abatement, also called tax phase-in, is a tool meant to lure new companies or get them to expand locally by offering a temporary reduction of taxes on new property. In theory, this helps Fort Wayne compete for desirable jobs that otherwise might go somewhere else. But some critics have said the benefits can too often go to firms that already rely on local customers and would not likely leave Fort Wayne anyway.
"If professional services are already in Fort Wayne, and they're already serving people in Fort Wayne, they're not going to do it or not do it just because they get a tax break," said Councilman John Crawford, R-at large. "If they're just serving a market that's already here, I don't see what good a tax incentive does."
New policy changes proposed by a joint city-county tax committee leave the door open for professional services – such as dentists, doctors and lawyers – to get tax breaks, though the job-creation standards could tighten, possibly making it more difficult to gain council's OK. The new guidelines could be up for approval by the city and county in February.
Another central question is whether professional firms can export their services to outside markets – the way a manufacturing plant or distribution center can – or simply tap in to an existing customer base already being served by other local businesses.
“The more advantageous businesses are those who can create jobs and export their business beyond Allen County,” said City Councilman Russ Jehl, R-2nd, who serves on the tax panel. “Your dentist office who will just be siphoning off patients from other dentists, they're going to have a much more difficult time getting an abatement.”
Under the panel's recommendations, 10-year property tax phase-ins would likely be reduced on all businesses – not just professional services – as the city and county try to minimize the burden on other taxpayers. When companies pay less taxes, other taxpayers make up the difference.
Professional services firms that rely largely on local customers would get lower marks under an updated scoring system, reducing their chances of getting tax incentives, according to the panel's recommendations, which were released this week.
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