City to review tax breaks for five tech firms

June 20, 2013

Five biotech and technology companies could see their Marion County tax breaks reduced or cancelled if the Metropolitan Development Commission decides they didn’t fulfill promises on new investment and hiring.

The commission will review and hold hearings over the next month on agreements with AIT Labs, Interactive Intelligence Inc., BCForward, T2 Systems Inc. and EnerDel.

For now, all five have been designated as out of compliance, a move that preserves the city's right to cancel the benefits or claw back revenue, said Ryan Hunt, senior project manager in the Department of Metropolitan Development.

Several executives said they’ll argue that they should remain eligible for reduced personal-property and real estate tax bills.

“We’re continuing to hire aggressively,” said Stephen Head, chief financial officer at Interactive Intelligence, which had about 200 fewer employees at the end of 2012 than it had expected. “We are working toward the commitment. It was just delayed because of the economy.”

Interactive built its headquarters on the northwest side in 2001 and expanded it in 2007. By that time, the call-center software firm had 333 local employees and expected to hire 637 more by the end of 2012. The firm could save almost $2.5 million in real and personal-property taxes under a 10-year abatement on the 2007 expansion.

By the end of 2012, Interactive had only added 434 new jobs for a total local headcount of 767. Earlier this year the company announced plans to ramp up hiring, and Head said Interactive is already at 840 employees in Indiana, mostly at the headquarters.

Interactive easily hit its investment target of about $30 million, Head said, and wages are slightly higher than the company projected five years ago. Average pay among new hires is $35.63 per hour.

Contract testing and research firm AIT has struggled since insurers slashed their reimbursement rates, but CEO Michael Evans said a new division launched in 2011, AIT Bioscience, is “going gangbusters.”

The city approved back-to-back abatements on new equipment at AIT’s Park Fletcher headquarters in 2008 and 2009. The company hit its target on the first expansion, but $6.5 million of planned investment in 2009 has not yet come to fruition, said Chad Sweeney, director of corporate development at Ginovus, a site selection and public incentives consultant that works for AIT.

AIT expected in 2009 to add 131 new jobs to a base of 226, for a total of 357 by the end of 2014.

Although the company said in an annual report that employment stood at 186 by the end of last year, Sweeney said it’s actually 220, counting 18 in the pharmaceutical division who were erroneously left off the report, plus more than a dozen temp-to-hire workers. He said the city has counted temps under other firms' abatement agreements.

AIT actually has until the end of 2014 to meet its hiring targets, and, Sweeney noted, it has received almost no benefits under the 2009 abatement, which was estimated to save the company $393,359 over seven years.

BCForward, formerly Bucher & Christian Inc., made a splash with a 2009 announcement that it would bring 200 jobs to its Market Street headquarters in downtown Indianapolis, and that the average pay would be $63.38 per hour.

CEO Justin Christian said the company met the job-creation goal, but that the growth didn’t happen through BCForward’s main IT services and staffing business, as he’d hoped. Instead, most of the new jobs were added to a new non-technology staffing subsidiary, StaffForward. Average pay of the new hires was $13.54 per hour, the company said in an annual report.

BCForward is also short of its investment target, having added about $248,000 in equipment, instead of $600,000. Christian said that could be the result of various factors, from lower-than-expected prices to a need for fewer new computers and systems.

“We do have plans to make continuous capital investments going forward,” Christian said. “Overall, all segments of our business are growing.”

Two other firms are in danger of losing eligibility for their abatements:

— T2 Systems, Inc., which makes billing software for parking garages, reported adding 39 jobs, instead of 115, as promised under an eight-year abatement granted in 2007. The company also fell short of its investment target—$1.7 million instead of $2.1 million. Its decision to move from 7835 Woodland Drive, for which the abatement was granted, to Keystone Crossing also could be problematic.

— EnerDel, the failed battery maker taken private by Russian investor Boris Zingarevich, reported 47 employees and no additional hires since 2008, when the city granted 10-year abatements worth almost $4.5 million for the Hague Road headquarters.

At the time, the company had 67 employees and expected to add 317. EnerDel has made substantial investments in equipment, $61.2 million, although it fell short of its $78 million projection.


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