From the Fort Wayne News-Sentinel:
No too long ago, local economic development officials eliminated “tax abatement” from their vocabulary, arguing that “phase in” more accurately described the incentive offered by their favorite job-creation tool.
But now that a heretofore obscure 29-year-old agreement with General Motors has induced Allen County Council members to waive all taxes on $110 million worth of new equipment for a full decade – thereby eliminating the year-by-year phase-in of taxes granted by all such previous deals – perhaps yet another term is needed.
One that illustrates the danger of making desperation-driven, open-ended commitments, perhaps.
Three decades after the fact, it's almost impossible to grasp the fear that gripped this community after International Harvester transferred truck production to Springfield, Ohio, in 1983. Faced with the loss of 3,000 well-paying jobs, economists and politicians predicted a local unemployment rate of 20 percent, and the elimination of another 12,000 Harvester-dependent jobs.
But the expected calamity never came, in part because GM announced plans to build a 3,000-employee truck plant in southwest Allen County the following year in exchange for an incentives package estimated to be worth more than $71 million in 1986 (the equivalent of more than $151 million today) – nearly $26 million of it in the form of tax abatements.
Not widely known until recently, however, was the fact that County Council's Aug. 10, 1984 declaration of GM's 937 acres as an “economic revitalization area” seems to have committed the county to offering the company far more generous incentives than were available at the time – whether it wants to or not.
As council President Darren Vogt noted last month, officials in 1984 couldn't have predicted that the state's General Assembly in 2011 would authorize 100 percent abatements for 10 years. When they signed the deal that has been interpreted as assuring GM the maximum benefits allowed by state law, abatements eliminated taxes on new buildings or equipment in the first year only, gradually increasing taxes to 100 percent by the end of the deal.
John Stafford, who recently retired as director of the Community Research Institute of IPFW, was the county's economic development director in 1984 and said the promise of perpetual tax savings was intended to attract ongoing investment in the plant. “Equipment is a critical part of the facility. If you stop investing, the plant loses traction,” he said. The fact that GM has upgraded the plant and expanded its work force continuously for nearly 30 years indicates the strategy worked.
Before GM's latest request surfaced last month, County Council had shown little enthusiasm for granting the maximum abatement allowed by law. But what about other companies looking to relocate or expand here? Even without a deal like GM's, won't they expect equally generous incentives?
And if they do, hasn't it just gotten a lot more difficult for job-hungry politicians to say “no”?
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http://www.news-sentinel.com/apps/pbcs.dll/article?AID=/20131003/NEWS/131009924/0/SEARCH
