Greenwood rethinking tax breaks

Until a new business is picked and planning to move in, the number of new jobs, line of work and average pay Greenwood is getting from tax breaks of more than $5 million already committed won’t be known.

By then, the developers of four new speculative buildings will likely already be getting a cut in their property taxes, approved by the city. And when a company is selected to move in to the space, city officials may not have a chance to weigh in with their votes on whether those are the types and number of jobs they want in Greenwood.

The arrangement is different from the typical process of awarding tax breaks to new or expanding companies, and city council members are raising concerns about whether enough information about the projects is being provided, and saying they could require more details from developers when similar projects come before them in the future.

Four developers have requested tax breaks to construct speculative buildings in Greenwood since 2015, but none specified how many jobs their projects would create nor what salaries those jobs would have. The Greenwood City Council approved tax breaks for each project, but some members are now considering more stringent requirements on future tax break requests for speculative buildings, such as asking the developer to give a projection of the number and quality of jobs the project is expected to produce.

When developers request a tax break, they are asked to provide information on how much money they will invest into the project, how many jobs will be created and what the salaries of those jobs will be. The council uses that information to determine if the tax break should be granted, and later uses it to check if developers have kept their end of the agreement. If a developer hasn’t invested as much money or created as many jobs as promised, the tax break, which lasts up to 10 years, can be ended early by the council.

When Scannell Properties, Van Trust Real Estate, The Peterson Company and Opus Development Company each proposed constructing speculative buildings in the past year-and-a-half, they listed their projects as creating zero jobs with a salary of $0 in documents filed with the city.

The developers argued that because their proposals are for speculative buildings, which don’t have any tenants signed yet, they aren’t able to give an accurate figure and don’t want to risk misleading the council with an estimate.

The problem is that without information on the number and quality of jobs, the council is unable to judge whether the project is appropriate, and won’t have the opportunity to evaluate if it was successful later on, council member David Lekse said.

Other council members have cited the track record of the developers in getting tenants for their properties, as well as the benefits of the increased property taxes from the multi-million dollar investments.

If a developer is going to invest in a nearly multi-million dollar project, even if the number of jobs and average salaries are low, the city is going to benefit from the increased property taxes they will get from the property, council member David Hopper said.

What’s important to consider is the tax break is solely for an empty building, not the equipment or improvements that will come later when a tenant is selected, Greenwood Mayor Mark Myers said.

If the tenant who moves into the building requests an additional tax break on equipment or improvements to the building, that is the time for debate about whether the proposed jobs are worthy of a tax break — not now, Myers said.

The Johnson County Development Corp. routinely hears from businesses looking for these types of large, speculative buildings, which aren’t available for immediate use in Greenwood, he said.

“I am extremely excited to have these businesses come and build these speculative buildings in Greenwood,” Myers said.

The fourth and most recent tax break for Scannell Properties was approved last week by the Greenwood City Council in a 6-3 vote. Lekse, Brent Corey and Bruce Armstrong voted against the tax break. Scannell Properties proposed investing $9.4 million on a 232,000-square-foot building in the Southpoint Business Park, off of Interstate 65 between Main Street and County Line Road. The developer requested a 10-year, $1.1 million tax break. The city will collect $1.1 million in taxes from the property over that same period.

Armstrong and Lekse cited what they considered a lack of information from Scannell Properties in their vote against the tax break. Corey said he opposed the project because it’s likely to be used for distribution, which Greenwood has enough of already.

The building is set be used as a distribution or manufacturing facility, according to documents filed with the city. Construction is planned to begin in the first quarter of 2017 and is projected to be complete by the end of the year, according to a tax abatement request filed with the city.

Lekse questioned if the way the developer filled out the form by not projecting jobs and salaries complied with the law. City council attorney Krista Taggart said the developer is simply required to answer the questions on the form, and an answer of zero is still a legal answer.

Council member Chuck Landon said he had considered voting against the project, but chose to support it because he had already voted for it at a prior meeting, and turning around and cancelling it after bringing the developer to the final meeting wasn’t fair.

In the future, he wants developers to provide the city with estimates of the number of jobs and average pay they will bring.

Council member Ron Bates said he had mixed feelings about whether the council needs to require more information from developers with speculative projects.

While getting the information would be beneficial, developers are already risking their own money on the projects, and projections on what tenants they will have are difficult to make, he said.

Council member Linda Gibson said the city should continue to support tax breaks for speculative buildings, but agreed that establishing upfront stipulations, such as requirements for the jobs created at the property to be above a certain salary level, would give the council a better sense of what they are voting to approve.

Corey said that while he wants more diverse and higher quality jobs in Greenwood, he didn’t want to set specific standards, such as a minimum average salary requirement for the jobs going into these projects. He would evaluate each proposal individually, he said.

Businesses in the medical and science industries, as well as high tech manufacturing, are more in line with what the city should be pursuing, rather than lower paying distribution jobs, he said.

“I think our standard should be we diversify the workforce in Greenwood and stop putting all of our jobs in distribution,” Corey said.

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The Greenwood City Council has approved tax breaks for four speculative buildings since 2015. Here is how much those projects will cost, and how much of a tax break was granted.

company;project cost;tax break

The Peterson Company;$5.3 million;$950,000

Van Trust Real Estate;$16.8 million;$2.1 million

Opus Development Company;$12.5;$1.6

Scannell Properties;$9.4 million;$1.1 million

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