City leaders getting aggressive about recouping tax breaks

January 14, 2010

Indianapolis is joining scores of cities across the nation that are starting to crack down on companies that promise jobs in return for tax breaks but fail to deliver.

Mayor Greg Ballard said Wednesday during his State of the City address that the city has received $5 million from Illinois-based Navistar International Corp. and expects to collect $500,000 more from other companies that also failed to meet job-creation requirements.

“It is no secret how tight our city budget is,” Ballard said.

Indeed, as the recession drags on, more municipalities struggling to fix roads, fund schools and pay bills increasingly are rescinding tax abatements to companies that don’t hire enough workers.

The shift is quite a change for cities and towns that often bend over backward to lure jobs by offering abatements and other incentives. Washington, D.C.-based economic development watchdog group Good Jobs First estimated companies in the United States spend $60 billion annually to entice prospects.

“We want to be partners with these companies and incentivize them to locate in Marion County,” City-County Council President Ryan Vaughn said. “But at the same time, we will hold them to their commitments when they come here.”

Ballard is proposing the money expected to be collected from so-called “clawback” provisions help fund economic development, convention, tourism and education efforts.

Pending Council approval, Indianapolis Economic Development Inc. will receive $3.5 million from the latest rescissions, with $2 million to invest in properties ripe for redevelopment and $1.5 million to bolster marketing initiatives.

Indianapolis Economic Development operates on a $1.1 million annual budget and receives funding from the city as well as from private sources.

The Indianapolis Convention & Visitors Association is set to receive $1.5 million, which will help it hire four additional salespeople and market Indianapolis to more cities.

One of the new hires would be located in Washington, D.C., bringing the sales staff there to four. Walsh said it is important to have a presence in the nation’s capital, given that 13,000 national associations are headquartered in the area.

The ICVA also is revamping its Web site and will unveil the new version April 1.

In addition, the mayor will seek $175,000 to transform the city’s charter schools initiative into an Office of Education Innovation. The endeavor would include restructuring the charter schools office to also serve as a county-wide hub for education initiatives and data-sharing, Ballard said.
Joanne Sanders, Council Democrat minority leader, expressed a few reservations about the mayor’s plans to spend the clawback funds.

“I know the money is going into economic development, and I certainly support that,” she said. “But I would like to see some of the money go back to the neighborhoods for infrastructure improvements.”

Navistar will pay back part of its abatement after failing to retain more than 1,800 jobs it had promised. The company, which had received $18 million in tax breaks during the past decade, announced early last year that it would close its east-side diesel engine plant.

Sanders said the city should have been more aggressive in negotiating with Navistar to collect a larger chunk of the $18 million in tax breaks it received.

Associated Press contributed to this report.



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