Mayor unsure how much of Rexnord incentives city could claw back

October 20, 2016

If Rexnord Corp. decides to close its Indianapolis manufacturing plant and move those jobs to Mexico, Mayor Joe Hogsett said he plans to pursue a clawback of local incentives that city officials granted the company several years ago.

But there are several “ifs” involved in the case, and how much the city might recover from Rexnord remains to be seen. While the city had success recovering $1.2 million from Carrier Corp. after it announced moving jobs to Mexico, the incentives in play in the Rexford case could be far less.

Rexnord announced Friday that it has “tentatively decided” to relocate its Indianapolis-based bearings plant next year to an existing Rexnord facility in Monterrey, Mexico. Rexnord is based in Milwaukee, Wisconsin, and has about 7,700 employees worldwide. The company makes bearings at its Indianapolis plant, located at 7601 Rockville Road.

At a press conference Wednesday, Hogsett said the city’s top priority is to keep those jobs in Indianapolis, although he knows that might not be possible.

“If this company does close this plant, I am fully committed to using every available tool to claw back any and every dime of local tax incentives that we are entitled to receive,” Hogsett said at the press conference.

When pressed as to how much the city might be eligible to claw back, Hogsett couldn’t provide specifics but said that it could be in the hundreds of thousands of dollars.

“A final number has not been identified,” he told reporters.

The incentive at issue is a five-year personal property tax abatement that the Department of Metropolitan Development approved in 2009. The DMD was unable to provide final benefit details Thursday morning, but, according to an IBJ report at the time, the abatement represented a tax savings of $79,653 for the company.

Under the terms of that agreement, Rexnord was required to install new equipment vaklued at no less than $1.7 million; retain its 270 full-time employees; and create no fewer than 41 full-time positions at a mandated compensation rate, said Hogsett spokeswoman Taylor Schaffer.

Even though the incentive was granted more than five years ago, Rexnord is still bound by its requirements, Schaffer said. 

Here’s how that works:

The five-year abatement began in 2010, when Rexnord took its first tax deduction, Schaffer said. Once that five-year period ended, Rexnord was still contractually required to comply with staffing and compensation requirements for another two years.

That two-year period expires at the end of 2017, Schaffer said. 

According to United Steelworkers Union Local 1999, the Rexnord plant currently employs about 290 union employees plus an additional number of salaried employees.

The incentives contract required Rexnord to make capital investment of at least $1.7 million. Schaffer said the company ended up making an investment of more than that. Because of this, she said, the city believes the value of those incentives – and the amount the city could try to claw back -- is in the range of $200,000 to $400,000.

Schaffer said the city’s Department of Metropolitan Development is still working to determine how much the city could claw back if the Rexnord plant closes.

“There is a process the city and company would go through including identifying a hearing date, sorting through damages, etc.,” Schaffer wrote.

Rexnord officials declined to discuss the incentives. "Our focus at this time is on getting through discussions with our union, so commenting on topics related to those discussions or our tentative decision would be premature," the company said in response to a request for comment.

The city had recent success with another clawback. 

Carrier Corp. announced in February that it planned to shut down its Indianapolis plant, moving that work to Mexico. The move is expected to result in 1,400 local job losses between 2017 and 2019.

In April, city officials successfully clawed back $1.2 million in local incentives that the city had granted to Carrier and its parent, United Technologies Corp., in 2011. 

Clawbacks are not necessarily an all-or-nothing deal. If a company fulfills part of its agreement, it may be entitled to retain some of its incentives on a prorated basis. 

That happened with Whirlpool, which shuttered its Evansville refrigerator plant in 2010. The company retained a product design center in Evansville for several years after that, but the plant shutdown left Whirlpool with fewer employees than it had agreed to in a state incentives contract.

The Indiana Economic Development Corp. awarded Whirlpool $1.1 million in tax credits in 2004. The state clawed back $800,000 of that amount in 2012.


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