In 2009, Greenwood was working to lure a major outdoor retailer and the development promised to come with it to an area along County Line Road.
Greenwood taxpayers paid $130,000 to hire attorneys and a financial consultant to create an incentive package for Cabela’s, including covering the costs of a loan to build a store and infrastructure work. Eventually, the company decided not to build a store, and Greenwood was stuck with attorney and financial consultant fees. The city also ended up spending $640,000 on a road project recommended in a traffic study Cabela’s requested.
Greenwood and Franklin regularly give tax breaks and cash incentives to businesses to encourage them to expand or hire locally, and not all deals have been success stories.
State lawmakers have been considering a change that would ensure taxpayers aren’t being taken advantage of when cities offer incentives to companies such as Cabela’s that cost local governments money, said state Rep. Woody Burton, R-Whiteland.
Legislators want to study tax breaks and cash incentives annually that cities and towns in Indiana give businesses to entice them into constructing buildings and hiring workers locally. The state, cities and towns should enforce payback agreements and be held accountable when they don’t, if businesses aren’t fulfilling their side of a deal, he said.
“I saw the opportunity here to make sure these things are functioning in a fair and equal way because ultimately the taxpayer pays for that,” Burton said.
A company shouldn’t promise to create jobs and then get tax breaks even if they don’t, said state Rep. Milo Smith, R-Columbus, who represented parts of southern Johnson County until recent redistricting.
Gathering and publicizing data on the incentives could result in tighter rules about getting back money given to or spent on companies that got property tax breaks but didn’t hire as many employees as promised, he said.
“We need to get that money back if they don’t live up to their commitments,” he said.
The proposed law change would require a state commission to gather and study data on the incentives but would not change what cities are doing. The goal would be to provide legislators data, such as the number of incentives given, the dollar value and the number of jobs created, so lawmakers can know if cities are giving away money to businesses that aren’t resulting in new jobs, buildings or equipment, said state Rep. Eric Koch, R-Bedford, who represents part of Johnson County and authored the proposal.
Based on that information, lawmakers would decide if a type of incentive, such as a 10-year abatement for property taxes, is successful and worth the cost or shouldn’t be offered anymore.
The only immediate impact the commission’s research should have on local governments is possibly to require cities and towns to file more paperwork with the state, Franklin Mayor Joe McGuinness said. Cities already collect the information, such as the incentive amount, the number of jobs promised and the amount of money companies are committing to invest locally, he said.
Gathering all the information so it can be compared could be useful for making sure all cities follow up with companies to be sure they’re compliant, Greenwood Mayor Mark Myers said.
Koch has seen numerous state and local incentives given and wants to see if they’re effective. The proposal is up for final approval this week, and this summer the commission on state tax and financing policy would create a schedule for when incentives will be studied and when the data gathered will be published. Every incentive would be studied at least once every five years.
The information should provide the basis for stricter laws later on, especially if studies show businesses are taking tax money but not giving jobs in return, Smith said. The legislature then could decide whether to eliminate incentives that aren’t working or modify the rules for how the incentives are used, according to the bill.
The commission won’t pick out specific incentives to study, such as the one with Cabela’s, but will look at the total incentives each government gives, Koch said. The information collected would include the dollar amounts of the incentives given, the reasons why they were given, whether the businesses were keeping the promises made, such as to hire local workers or buy equipment, as well as an estimate of the number of jobs that resulted from the incentives.
“This is a very deep dive. This not a windshield, drive-by review,” Koch said. “I think with more information, we can be assured that we are being good stewards of taxpayer dollars.”
Currently, the state has no regular or formal way to evaluate the incentives given and whether they’re being used as they should be, Koch said. The annual studies would give the legislature information on incentives so they could regulate them more closely if they saw fit, he said.