Dear Editor:
In a very connected, competitive and modern economy, businesses today make data driven location decisions. The data is typically provided by consultants who specialize in assisting businesses in assessing alternative choices.
In other words, companies will not simply “show up and set up shop” because a city has built a new business park.
O’Connor
Peterson
Businesses will consider non-financial community assets in their decision making process. Some of these factors might include climate, cost of living, education, parks and arts. Also, with technology communities can be evaluated expeditiously with a few keystrokes and touch of a button.
However, when businesses are growing, they look to local government to support their long-term capital commitments in the community. Therefore, it follows businesses utilize competition amongst cities to maximize their return on investment in the community.
Modern economic development strategies of attracting, retaining and expanding businesses involve tax incentives. Incentives, particularly tax incentives, can appear to be corporate welfare. However, cities do not simply “give” money to corporations. Cities weigh the expected long-term benefits and tax revenues to be generated against expected costs, including incentives, to determine whether an incentive package is viable and in the best interests of the taxpayers.
If a new business buys a tract of land and builds a building on it, the building increases the city’s property tax base. The improvements made add to the city’s assessed value by converting an unimproved parcel with a low tax value, thus increasing the city’s financial capacity and supporting the existing credit rating.
If that business expects to hire new employees, a majority of these new employees will consider relocating to the city as a result of their employment. They are all potential homebuyers or renters and consumers who will patronize the local merchants and businesses in the community. The city will also receive more user fee revenue and local income tax from new residents.
Such benefits are considered along with costs the city will incur due to business activity, such as infrastructure upgrades or expansions and additional city employees.
A business may propose the city allow it to pay a reduced amount of property tax for the first few years after relocation. It should be noted here there are restrictions on this activity which is meant to insure there is a positive impact on the assessed value of the City. Generally speaking, these tax phase-ins are declining over a period of time which allows the city to collect a certain amount of property tax during the phase in. This helps the business lower its tax liability when migration, start-up and operating costs are the highest.
The City Council has established committees (Economic Development and Finance) which thoroughly review projects and requests for incentives. This includes, but is not limited to, economic analysis, legal opinions and consideration of the existing business climate. Furthermore, the city has in place incentive policies and guidelines which allows the city Administration to provide businesses information up-front, is transparent to citizens and focuses on incenting desired business growth.
Our economic development director and administrative staff spend considerable amounts of time vetting and crafting incentive programs and determining if a particular project should be incentivized. The director gathers input from other local officials, including Council members, other businesses, civic organizations, school officials and the Chamber of Commerce. The City’s legal counsel, Controller and Mayor also review these proposed incentives and provide input before they are submitted to the City Council for consideration.
As a result, projects that are approved are expected to provide additional value to the community in both tax base increases and employment.
When tax incentives are considered, what does Noblesville stand to gain by businesses relocating, staying or expanding? A larger assessed value, lower tax rates and new revenues over time to fund a variety of improvements to be made throughout the community.
The full proposal for any business incentive proposals can be found on the city website, cityofnoblesville.com, and, as always, Council members are available to answer your questions.
Darren Peterson
Noblesville Common Council, At-Large
Greg O’Connor
Noblesville Common Council, District 5 and former Council Finance Committee Chair