Local Government and Manufacturers and Government & Economic Development and Government and Manufacturing & Technology

Lagging on jobs, earplug maker agrees to cancel tax breaks

August 11, 2014

A local manufacturer known for earplugs will repay $19,700 from a tax-break deal because it didn't create the number of jobs it promised in 2007, under a clawback agreement with the city of Indianapolis.

Aearo Technologies LLC, owned by St. Paul, Minnesota-based 3M Co., potentially faced a much higher penalty. The city could have sought as much as $265,000 under the terms of the 2007 tax abatement agreement, said Ryan Hunt, a senior project manager in the Department of Metropolitan Development.

However, the company invested nearly $16 million, about a half-million dollars more than promised, in buildings and equipment on the northwest side, and has retained a significant number of full-time, permanent jobs.

"We gave them some credit, obviously," Hunt said. "We thought the best remedy was to ask for some repayment and end it early."

The Metropolitan Development Commission on Aug. 6 approved a resolution to accept the $19,700 repayment and terminate the remainder of the abatement. Aearo, which agreed to the terms of the resolution, could have benefited from the abatement on real property for another year and on personal property for another three years, Hunt said.

The company promised in 2007 to retain 368 permanent full-time positions with an average hourly pay of $27.02 and add 48 more employees. The company also planned to invest $15.4 million in a new office building and research facilities.

The company spent nearly $16 million in 2008 on buildings and equipment. However, this year, Aearo reported having 354 employees—lower even than the figure it had promised to retain. The company also has 134 contract workers, but Hunt said the commission decided to count only permanent, full-time employees.

Aearo's total tax savings since 2008 is $579,411, according to the Department of Metropolitan Development. Because the company fulfilled other aspects of the abatement agreement, it was entitled to retain part of its savings.

Aearo 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.

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

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