Economic Development Incentives and Tax Abatements and Job Creation and Manufacturers and Government & Economic Development and Government and Economic Development and Manufacturing & Technology

City considers whether to revoke 3M tax break

March 24, 2014

The city of Indianapolis could claw back more than $265,000 in property-tax breaks granted to a local division of the 3M Co. that fell short of its employment commitment.

Minneapolis-based 3M spent nearly $16 million in 2008 on buildings and equipment for Aearo Technologies, which designs and makes acoustical composites, but hasn’t hit hiring targets set out in a seven-year tax-abatement.agreement.

Aearo reported to the Department of Metropolitan Development that it has 354 employees, short of its commitment to retain 368 people and add 48 more.

While Aearo faces $265,655 in potential damages, the Metropolitan Development Commission might not be inclined to collect all that money, said Ryan Hunt, senior project manager at DMD.

“Clearly, they made a lot of investment here,” Hunt said of 3M. The commission could agree to settle for a smaller amount, based on the 354 jobs retained and value of investments, which exceeded the company’s commitment by about half a million dollars, he said.

3M could also argue that it fell short because of factors beyond its control, Hunt said. The MDC will recommend whether to draft a new abatement agreement or claw back the money before a public hearing, which will be set this spring, either April 16 or May 7, he said.

Representatives of Aearo and 3M didn’t return phone calls seeking comment.

Aearo, which is best known for making ear plugs, was on a growth tear before its sale to 3M in 2007 for $1.2 billion. It generated $508 million in annual sales, and revenue had been growing over the prior five years at an average annual rate of more than 12 percent. 3M bought the company to expand its health and environmental safety product lines.

The tax-abatement agreement called for 12,000 square feet of new office space, plus a new acoustical testing facility, both of which were constructed.

Aearo came close to hitting its hiring target in 2010, when it added 42 jobs, but the payroll declined the following year and in 2012. Hiring appears to be on the upswing, but some of that is through contract workers, which the MDC will not count toward complying with the tax-abatement agreement, Hunt said.

Aearo’s facilities are at 5457 W. 79th St. and 7911 Zionsville Road on the northwest side.

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