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Tax abatements can be tipping factor in relocations

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When Mays Chemical Co. considered building a new facility for mixing and repackaging chemicals, such as glycerin for soaps, the tax breaks from Greenwood were part of what made the city an attractive location.

When the Indianapolis-based company chose to build in Greenwood, two of the deciding factors were the location in a business park near Interstate 65 and the nearly $550,000 in tax breaks Greenwood offered, according to Eric Gillispie, vice president and corporate controller.

“It’s not the only factor, but it’s an important factor when you look at the various costs,” Gillispie said.

More than 15 companies are getting phased-in property taxes for locating or expanding in the city, and most of the businesses have 10-year tax breaks. The length of time for a tax abatement often relates to how long a company’s lease is on a new facility, such as a five-year or 10-year commitment, Mayor Mark Myers said.

The tax breaks are on equipment and building construction, in exchange for that company adding or keeping jobs in the city. The 10-year tax breaks typically start at zero property taxes in year one, followed by gradual increases each year until a company starts paying full, typical tax bills in year 11.

A tax abatement is so commonly offered as an incentive that most companies view a tax break as a given when they look at expanding or locating in a city, according to Cheryl Morphew, president and chief executive officer of the Johnson County Development Corp. She said tax breaks aren’t a top priority to every company, but they’re crucial to others.

“Trust me, they are expecting, at a minimum, tax abatements on the table,” she said.

An abatement isn’t risky for the city because the city can at any time stop giving the tax break to a company if the business isn’t investing in equipment or buildings as promised, she said.

Greenwood City Council member Bruce Armstrong said he hasn’t seen any tax breaks taken away during his 11 years on the council.

Morphew said some companies make location decisions based on what tax breaks are offered, and ULTA Beauty, a company that is building a 670,000-square-foot distribution facility in Greenwood, is an example of a business that did.

Incentives, including Greenwood’s tax breaks, were key in ULTA’s final decision to build and operate in the city, she said.

Companies don’t all see a tax abatement as a significant part of deciding where to build, and Greenwood’s offerings are average, Nachi America vice president Francis Wisner said. Nachi is receiving five tax abatements from the city for building projects and equipment.

“Is that the final thing that causes a company to pick a specific area? Move to point A because of an incentive? Probably not,” he said. “It’s just a piece of the decision-making process.”

For Sign Solutions, 505 Commerce Parkway West Drive, a tax abatement made the company’s Greenwood facility possible, president Monty Hopkins said. The company makes and installs most metal, wooden, stone and plastic signs, except billboards.

“I would say it was critical. It made the project affordable at the onset,” he said. “We chose Greenwood, and the abatement made the project affordable.”

A tax abatement is particularly helpful when opening a new location, such as the Mays Chemical plant in Greenwood, because a new facility doesn’t make money right away, Gillispie said. Mays’ Greenwood operation wasn’t earning the company money before it was mixing, blending and packaging chemicals, he said. The company took a few years before getting the location fully staffed and operating normally, he said.

“You don’t tend, in my experience, to put the walls up and then push a button. There’s always a start-up process, a start-up period, to get operational,” he said.

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