Criteria for incentives: Will Greenwood, Franklin follow Indy’s lead?

Few companies that have been given tax breaks to set up shop in Greenwood and Franklin would meet a new set of criteria laid out for businesses seeking taxpayer incentives in Indianapolis.

At this point, neither Greenwood nor Franklin have specific criteria in terms of pay, benefits or number of jobs created that businesses have to meet to be eligible for incentives. But city leaders said they have become more selective when deciding who gets them.

When cities agree to give companies tax abatements, or tax breaks, there is less money going into the city’s TIF districts, which are tax dollars set aside for economic development and infrastructure improvements, instead of that money being funneled to other public tax entities such as fire, police, schools and libraries.

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Develop Indy, Indianapolis’s economic development agency, recently decided that come Jan. 1, only companies bringing jobs that pay at least $18 an hour can qualify for incentives from the city. Those companies must also provide employee-sponsored health insurance and support other community programs to be considered for a tax break. The goal with the change, Indianapolis leaders said, was to leverage tax incentives to achieve broader community benefits, such as improving the local workforce’s access to transit, training, child care and social services, and driving down poverty rates.

If local cities passed a similar set of standards, some recent deals would meet that criteria, but many would not.

Johnson County has 35 active tax abatements on real property, or land and real estate, with 22 of those being in Greenwood and 13 in Franklin, according to the Johnson County Auditor. And 36 businesses have tax abatements on personal property, which is equipment that is needed to operate the business, according to the Johnson County Assessor.

Both Greenwood and Franklin’s mayors said a standard they try to follow when deciding whether a company should get incentives is whether they are willing to pay their employees the county’s average wage, which as of January, was 1 cent shy of Indianapolis’s $18-an-hour requirement at $17.99 an hour, said Dana Monson, executive director of the Johnson County Development Corp.

Amazon, which could open as early as next week and is on track to become the largest employer in Johnson County, would not have met Indianapolis’s new standards, but Greenwood gave it a 10-year, nearly $7 million tax break on real and personal property due to the sheer number of jobs — 1,250 — and name recognition.

“We still look at things on a case-by-case basis. We also look at incentive packages as a whole,” Greenwood Mayor Mark Myers said.

“For example, Amazon didn’t agree to pay that, but they’re offering full healthcare benefits, 401K and tuition reimbursement. So even though their salary was $15.50 an hour, all of that adds about 32 or 33 percent on top of that.”

When Cummins, Inc. decided to build a technology and digital hub in Greenwood, the city offered more than $10 million in incentives, including writing a $1 million check to a local vocational high school that specializes in the trades.

Why? Because the 100,000 square-foot office building is expected to bring at least 500 jobs that pay, on average, $100,000, including benefits, as early as next year, with the possibility of up to 1,500 jobs if a second phase is built. Most of the initial 500 employees are being relocated from Columbus or Indianapolis.

Some other Greenwood successes, if it had a similar set of criteria, would include Futureway Logistics, LLC, which plans to bring 45 jobs that pay $50,000 to $75,000 a year, plus benefits. The city awarded the company a $445,000 tax break.

Others, such as California Custom Fruits and Flavors which was considered a huge win for Greenwood, falls short, bringing 18 jobs at $17.90 an hour, plus benefits. The city gave the flavors manufacturer a $1.3 million tax break.

A recent proposed investment in Franklin would have met Indianapolis’s new standards, but it backed out. The city offered the AMayZing Food and Beverage Group a $1.1 million tax break because the company had agreed to hire 150 employees at $20 an hour, plus benefits, set up a trust to pay for school supplies, clothing and transportation, and offer 10 college scholarships a year.

The company later backed out of plans to open in a shell building that has been under construction.

Mayor Steve Barnett has said the city needs more jobs that pay $18 to $25 per hour.

Franklin, in general, awards fewer tax abatements than Greenwood.

Franklin uses U.S. Census data to look at what the average wage is — throughout the U.S. — for the specific industry of any company seeking an abatement, whether it be automotive, manufacturing or technology, among others, said Krista Linke, the city’s community development director. Average salaries vary depending on industry, she said, and city leaders like to see pay for local jobs be at or above the average pay for that industry.

How much of an abatement a company receives and for how long depends on its level of investment in the community, Linke said.

“Every case is different. No project is the same,” she said.

A couple years ago, the city considered creating a point system to determine whether companies should qualify for incentives, how much they should receive and how long the abatement should last, but ultimately decided against it due to how cumbersome it would have been, she said.

“I think the EDC members and council members like to have that ability to vet. It’s a lot more in depth in that regard. They like to get a good feel for it themselves. So that makes it really hard to put a point system to it,” Linke said.

Franklin does not approve every abatement request, Barnett said.

“It all depends on what does it do for your community. We don’t want to give tax breaks to someone who doesn’t invest a lot in the community or someone who isn’t going to pay at least the county average,” Barnett said.

“I’ll tell you right now if someone comes to me with say $11, $12, $13 an hour jobs, they’re not going to get an incentive. They’re just not,” Barnett said.

Franklin has turned away businesses seeking incentives, usually because they don’t like the type of operation that business wants to bring to the city, he said.

“One business, and I won’t name them, wanted to move to a certain location, and they were going to have 100 trucks a day coming in and out of there, and we said no. That’s not something that we want to do,” Barnett said. “We can’t tell somebody what they can’t do if it’s zoned properly. However, we can discourage it by not offering any incentives.”

In Greenwood, most abatement requests are approved unless there is community uproar, usually regarding the type of business, such as if it’s a warehouse, and where it would be located, such as near a neighborhood.

Myers has touted for at least a year that the city is in a “sweet spot,” meaning it gets to pick and choose which businesses it wants to help locate in the city.

Greenwood city leaders, for the most part, only offer incentives to businesses willing to pay at least the county average, he said.

“We still look at things on a case-by-case basis. We also look at incentive packages as a whole,” Myers said.

“As far as just flat out saying no, we don’t do that,” he said.

But, Myers said, it is absolutely not out of the question for Greenwood to impose a similar set of standards.

The city has looked into tying a certain percentage of jobs created to Greenwood residents, meaning in order for a company to receive a tax break, it would have to hire a certain number of Greenwood residents, something Indianapolis also included in its new criteria.

But Greenwood has not done that. It is complicated because they have to make sure the city’s job pool for each industry has the ability to meet those needs, Myers said. Light industrial and distribution, which make up a significant chunk of the jobs in Greenwood, would not be an issue, he said.

“It’s more feasible for them to hire a certain number of employees in those fields,” Myers said.

Greenwood has also turned businesses away.

“If I have somebody come to me with $10 an hour jobs, I’m not even going to make them an offer,” Myers said. “Just last year, I had a company come offering $9 an hour jobs, and we just said no, we’re not providing incentives for that. You’re so far off what we’re looking for. But they came anyway. I’m not sure how they’re doing on their job pool. Last I checked, it wasn’t good.”

Another source of contention locally is whether speculative buildings should receive tax breaks. Some developers refuse to predict how many jobs the future tenant might create and what those jobs might pay, but receive tax breaks anyway. Imposing a set of standards similar to Indy’s would eliminate that entirely.