City cracking down on noncompliant tax breaks

August 5, 2011

The city of Indianapolis is seeking to overturn property tax breaks for more than 20 companies that have continued to apply for abatement even though they were unable to meet job commitments.

Companies that receive personal or real property tax abatements are required to self-report their employment numbers to show whether they are complying with economic-development deals.

When companies fail to comply but still file for their tax abatements with the Marion County Auditor, the city begins a process to terminate the abatements.

This year, the Department of Metropolitan Development is bringing more actions against noncompliant companies than it has "for the last several years," said Ryan Hunt, a senior project manager. He said the economic downturn appears to be the overriding factor.

Once the Metropolitan Development Commission determines that a company has failed to meet its commitment, the city has a few options: It can claw back prior abatement savings, prevent future savings or renegotiate a more realistic jobs-commitment deal, Hunt said.

Among the companies that have not met jobs commitments, some hired up to 80 percent of the employees they promised, while others failed to add any jobs, he said.

Hunt said most companies aren't trying to pull a fast one by continuing to apply for tax breaks. Abatement documents often are filed as a matter of routine by a company's accountants, who may be unfamilar with the deal requirements or not have access to up-to-date employment information.

The retail graphics firm Pratt Corp. promised in 2004 to create 141 new full-time positions paying an average of $21 per hour and retain 177 existing employee at its facility along Shadeland Avenue. The company fell below its hiring targets in 2008, but still filed for abatements in 2009 and 2010.

CEO Dan Pratt said he can't blame the city for moving to pull the abatement, "based on the agreement we signed."

Pratt said he hadn't even thought about abatements in several years as he focused instead on stabilizing and rebuilding the company, which now has about 175 local employees.

"We've had to scale down the last few years, that's just the honest truth," Pratt said. "We've had our ups and downs like most people."

Gannett Co., parent of The Indianapolis Star, promised in 2008 to create 209 new jobs as part of a National Shared Services Center, in exchange for eight years of personal and real property tax abatements worth about $36,000. But the company created only 129 jobs under the Shared Services umbrella, prompting the city to file to rescind the abatement.

Robin Pence, a Gannett spokeswoman, said the company met its jobs commitment by hiring 100 people for a separate corporate entity, Gannett Satellite Information Network.

The abatement agreement will have to be reworked to include both corporate entities, Hunt said.

Many of the economic-development deals, including Gannett's, also included incentives from the state. In Gannett's case, the Indiana Economic Development Corp. offered $780,000 in performance-based tax credits and $155,000 in training grants.

The state incentives are tied directly to actual job creation, and companies receive a prorated share based on how well they perform, said Katelyn Hancock, a spokeswoman for the IEDC.

She said IEDC, as a matter of policy, does not share information on how many jobs companies actually create or how much of the promised incentives they actually receive.

"You'll have to ask the company," she said. 

Among the other companies on the city's list of property tax abatements to cancel or renegotiate: Aero LLC (36 jobs), Auto Research Center LLC (22 jobs), Engledow Inc. (16 jobs), The Schneider Corp. (141 jobs), Sentry BioPharma (30 jobs), SVC Manufacturing (40 jobs), and Trilithic Inc. (127 jobs).


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