Tax abatements for all!
That’s the message city officials seem to be sending of late, and it’s a troubling trend for a county tax base that struggles to fund basic services.
The latest head-scratcher of a deal: Indianapolis Power & Light Co. is up for an abatement that would save the utility $3.1 million on personal property taxes for investing $24.5 million in a so-called Battery Energy Storage System at its Harding Street Station power plant in southwest Indianapolis.
While we enthusiastically support economic-development deals that lead companies to invest in central Indiana—boosting our tax base and adding jobs—the deals should not be automatic every time a company spends money in response to customer demands, market opportunities or regulatory requirements. These are supposed to be incentives, after all, not sweeteners.
IPL’s investment will not create a single new job. This point is not in dispute. And despite abatement language suggesting the deal will help IPL retain 791 employees, an IPL spokeswoman admitted there are no plans to eliminate any local jobs if the facility is not built in Marion County.
Ostensibly, the 10-year abatement deal—which could get a final vote from the Metropolitan Development Commission on June 3—would prevent IPL from building the facility instead at its $600 million Eagle Valley plant under construction in Martinsville. But IPL already has drawn up plans for locating the energy storage facility in Marion County, intends to start building it this summer, and a spokesman acknowledged the utility prefers the Marion County site.
Defenders of the IPL deal will correctly note the investment will grow the tax base despite the 61-percent discount—amounting to about $291,000 in savings annually—on personal property taxes during the abatement period. And we certainly don’t take issue with IPL or any other company for pursuing all options to keep costs low and deliver better returns for shareholders.
We have less sympathy for government and economic-development officials, who must resist kowtowing to every corporate demand. In a perfect world, tax abatements and other government incentive deals should be used sparingly to attract investments—and critically, jobs—that would not arrive otherwise. That’s a tricky formula, and there are often worthy deals that don’t meet that high threshold. IPL’s is not one of them.
Instead of giving out tax abatements like candy, government officials should endeavor to keep taxes low for all businesses—including those that never seek out abatements—and provide a better value for those tax dollars.•
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