Abatement outlook

Tax abatements regularly come before Portland City Council, are referred to an advisory committee and return for approval.

Some pass easily. Others have been the subject of pointed questioning from council members.

In the last 12 years, none have been rejected.

Since 2005, the City of Portland has awarded 91 personal property and real estate tax abatements on a total of $231 million worth of investments by 27 different industries and businesses. In that same time period, Portland has not denied a tax abatement request.

Over the last decade, the total dollar amount of commercial investments that have been granted tax abatements has risen, because of large abatements requests granted major employers and manufacturers like FCC (Indiana), Fort Recovery Industries, Tyson Foods and Carrera Manufacturing.

In 2005, Portland awarded tax abatements on investments totaling $17,107,479. In 2016, the total of investments receiving tax abatements was $21,221,007. So far this year, the city has already exceeded its 2016 total, awarding abatements on investments of $28,451,317, bringing the total of active tax abatements to $135.7 million.

But the total of investments that receive abatements is not the amount of money that the city forgoes in tax revenue. Instead, it is the value of real property (buildings and land) and personal property (production equipment) that a business is acquiring.

The total savings estimated over the course of an abatement is not uniformly available for abatements before 2015.

In 2016, the city awarded abatements that will result in total estimated savings of $841,357 for the six benefiting businesses over the next ten years.

Jay County Development Corporation executive director Bill Bradley regularly presents tax abatement requests to the governing bodies of the county’s three largest municipalities on behalf of local industries. He said tax abatements are a necessary tool to keep rural communities like Portland competitive in an ever-globalizing marketplace.

“Cities like Carmel have businesses stumbling all over themselves to move in,” Bradley said. “In rural Indiana, we don’t have that luxury.”

There are two types of tax abatements Bradley presents to municipal councils.

One is real property, requesting abatements on a real estate purchase or physical structure that is being constructed. The other is personal property, typically on manufacturing equipment. Real estate abatements are granted as 10 year abatements, and personal property are granted in five year durations.

For a 10-year real estate property abatement, tax savings are phased out gradually over the 10-year period. The first year sees 100 percent of taxes on the investment forgiven, followed by 95 percent the following year, 80 percent, 65 percent, 50 percent, 40 percent, 30 percent, 20 percent, 10 percent and 5 percent, until after the 10th year zero percent of the investment’s taxes are abated.

Bradley said that on personal property, the abatements are always five years because of the rapid depreciation of the value of manufacturing equipment.

Each year, businesses with active abatements have to file a compliance form with the municipality, and municipal councils must agree to honor the abatement for a given year. According to Bradley, the abatements are assessed after reviewing expenditures and job growth, and if those values are in “substantial compliance” with the original agreement.

There have been times that certain years of abatements have not been honored because compliance forms have been late or not submitted at all.

“If there’s no compliance form, then that company doesn’t get any abatement for that year,” Bradley said.

FCC (Indiana) has the city’s largest number of abatement requests. Since 2010, the city has approved nine abatement requests for the manufacturer. In that same timespan, FCC has grown its workforce from around 450 in 2010 to over 800 workers today. Fort Recovery Industries comes second in the number of abatements awarded over the last decade, with its first abatement in 2010, and a growth of 40 jobs over the last seven years.

The most recent abatements, granted in May, were five-year abatements of $26.3 million in improvements at FCC and $206,317 on upgrades at Dayton Progress.

Bradley said for Portland, abatements are also necessary to compete with tax laws in Ohio, where the personal property tax has been abolished.

“As a border county, we’ve got to compete with that,” Bradley said. “I would feel safe to say 98 percent of what we’ve done is in manufacturing. And more of it is personal property than real property.”