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Tax Abatement Application and Grant Funding for Futures Family Planning Clinic — Preview of Monroe County Council Meeting 2016-03-08

6 Mar

2016 County Council MembersThis Tuesday’s regular session of the Monroe County Council (2016-03-08 5:30 PM in the Nat U Hill Room) will feature several important topics, including a first reading for a tax abatement application for the 3D Stone mill at 6700 S Victor Pike and appropriation of grant funding for the County’s Futures Family Planning Clinic. The full packet for the meeting is available here: Council_Packet_20160308.

The Council will be hearing the first reading (of two) for a personal property tax abatement application from Lily and Kurt Sendek (doing business as L & K Real Estate Investments) for an expansion of their 3D Stone business at 6700 S Victor Pike, in southern Monroe County.

The property is shown below. Note that the property crosses Victor Pike, and includes a parcel that a proposed County greenway (going along the Illinois Central rail line) goes through.

Screenshot 2016-03-06 08.52.49

3D Stone Mill Property, 6700 S Victor Pike

The site currently has 44 full-time employees. The owners are proposing to add a second production shift to the business, which will add approximately 32 new full-time permanent positions, ranging in starting wages from $11 (General Labor) per hour to $20 (Stone Cutter) per hour, plus a supervisor at $25 per hour. Benefits include employee profit-sharing plan and health/dental/vision insurance. The abatement application in the council packet (Council_Packet_20160308) provides more details on positions, wages, and benefits.

The owners are requesting the tax abatement only on personal property (i.e., business equipment) — on the approximately $800,000 in equipment they propose to purchase for the business expansion (including CNC cutting equipment, saws, forklifts, and IT production management system).

Here is a picture of the business. Note that the red lines are caused by an error in the county’s GIS.

Screenshot 2016-03-06 09.05.43

3D Stone Mill

The County Council will be hearing this tax abatement application for the first reading. It has already been reviewed and received a favorable recommendation by the Monroe County Economic Development Commission (EDC). If the County Council votes in favor of this tax abatement at the meeting, a public hearing will be conducted and the Council will take a final vote (“confirmatory resolution”) on the abatement.

Other items up for discussion at the meeting include:

  • The Health Department is requesting the appropriation of funding (as well as creation of budget lines and other housekeeping) for the County’s Futures Family Planning Clinic from Title V, Title X, and Temporary Aid to Needy Families (TANF)
  • The Legal Department is requesting the appropriation of $40,000 in fees that the county attorneys are allowed to receive in penalties and fees collected from delinquent personal property taxpayers. County attorneys are able to supplement their regular salary by working off-the-clock to collect unpaid personal property taxes. The amount they receive is on top of the taxes actually collected on behalf of the county, so the county does not lose any tax revenue.
  • The Probation Department is requesting the appropriation of $50,000 in grant funding from the Annie E. Casey Foundation’s Juvenile Detention Alternatives Initiative (JDAI), which supports alternatives to incarcerating youth.
  • The Veterans Affairs department is requesting an additional appropriation of $41,503, primarily because the county’s Veterans Service Officer position was reclassified and upgraded to full time after the 2016 budget had been set. In addition, $5000 of new training funding is being requested.

As always, the meeting is open to the public, and will be held this Tuesday evening (March 8, 2016) at 5:30 in the Nat U Hill room of the Monroe County Courthouse, and it will be broadcast on CATS. Public comment will be taken. Hope to see you there!

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Future of Tourism in Indianapolis?

31 Jan

IMG_1056The Indy Star published an interesting and balanced article today on the Indianapolis Convention Center, its expansion over time (there is a great interactive infographic on its expansions since 1972 at the end of the article), and its effects on tourism and visitation in Indianapolis.

The article makes the case that the Convention Center has largely been effective, and kept Indianapolis highly competitive as a second-tier destination, bringing in the desired revenue and visitation into the city.

However, at the same time, the article points out some of the long term challenges. First, convention center expansion in itself is a very expensive arms race — just as Indianapolis invests in expansion, its competitor cities are doing the same thing, and competing over essentially the same visitors. Second, the article points out some challenges more specific to Indianapolis. Indy is perceived as a bland Midwestern city — friendly, walkable, but not very exciting. It doesn’t have many natural assets, and those that it does have (the White River, for example) are very difficult to capitalize on. And of course, RFRA has harmed the state’s reputation and had some effect on convention business.

One thing that the article never addresses is the benefits and costs that the Convention Center and tourism in general has on residents. I have never seen good statistics (anywhere, not just with respect to Indianapolis) on how much tourism taxes (lodging, car rental, ticket taxes, and food and beverage) cost residents (vs. visitors). Clearly lodging and car rental taxes are paid primarily by visitors (although they are also indirectly paid for by businesses whose employees and consultants travel to Indianapolis). But what about food and beverage taxes? How much new revenue do they actually bring in, and how much goes to local residents?

Tax Abatement Considered at Tonight’s County Council Meeting

22 Dec
2015 Monroe County Council

2015 Monroe County Council

The Monroe County Council will be considering an application for a tax abatement at its work session tonight, 2015-12-22, the only item on the agenda. The packet is available here: Council_Work_Session_Packet_20151222

Tax Abatement Application Facts

Here are the basic facts about the tax abatement application:

  • The applicant is RSSJ Rentals, AKA Robert (Bobby) Scank, local restaurateur (Bobby’s Colorado Steakhouse), who plans to build a 3600 sf building. The application that the building will cost approximately $300,000 — however, Mr. Scank told the Economic Development Commission (EDC) that the cost will be closer to $425,000 (since the tax abatement is tied to the investment, the value of the abatement would scale accordingly).
  • The tenant will be Shoshone Trucking, based in Peru, IN. Shoshone will use the property for truck storage, vehicle maintenance, materials storage, and an office. The company currently has 12 employees, and plans to expand to 20 when they are able to move into the building
  • The jobs to be added are truck drivers, with a starting wage of $21.10/hour plus benefits.
  • The property is 5260 W Vernal Pike.  A map is included below. This property is within the county’s Westside Economic Development Area (TIF District). This means that the costs of and benefits of this take abatement will both accrue to the TIF district, not to the other units of government that service this parcel. This also has implications as to the process (which I’ll discuss below).
5260 W Vernal Pike Map

Parcel Boundary, at West Vernal Pike and Angelina Way

  • The property is zoned Light Industrial, with no zoning changes required for this usage.
  • Mr. Scank reported that he had a 5-year lease with Shoshone Trucking, with 2 2-year options. For this reason, he is applying for a 5-year tax abatement (this is shorter than the more typical 10 years). As with all tax abatements, the percentage of new assessed value as a result of the investment that is abated declines throughout the life of the abatement.
    • For example, for a 5-year abatement, the first year 100% of the new assessed value is abated, in the second year 80%, down to only 20% in the fifth year. After the term of the abatement, 100% of the new assessed value is taxed.

This abatement application is unusually small in scale compared to our typical tax abatement applications. Most of our abatements come in the form of much bigger investments (i.e., bigger buildings); this project is similar in scale  and scope to the abatement that  the Council granted for Eco Logic in 2014.

Process

All tax abatement applications in the unincorporated county (which this is go to the Monroe County Economic Development Commission (EDC) for review, analysis, and recommendation to the County Council. The EDC met last Thursday, 2015-12-17, and voted 3-0 to recommend in favor of the 10-year abatement (the abatement request has subsequently been reduced to 5 years).

All tax abatement applications require two votes by the County Council: what is called a “declaratory resolution” and a “confirmatory resolution”. Tonight will be the declaratory resolution. If the vote is in favor of the abatement tonight, then the Council will schedule the confirmatory review and vote at their 2016-01-12 regular meeting.

In addition, however, because this abatement request is in a TIF district, the Monroe County Redevelopment Commission and the Board of Commissioners (as the legislative body that created the Redevelopment Commission) also are required to approve the abatement request. The RDC’s review of the tax abatement application is restricted to consideration of whether the granting of the tax abatement would jeopardize the Westside TIF’s ability to meet its bond obligations. Since the investment that is associated with this tax abatement will increase the revenue to the TIF district and the overall value of the investment is very small in proportion to the overall value of the TIF district, it would be very difficult for the RDC to find that the abatement would jeopardize the ability to make bond payments. In any case, the RDC met on 2015-12-17 and found that the abatement would not jeopardize the Westside TIF’s ability to meet its bond obligations.

The County Commissioners’ review will be scheduled for their  regular meeting on Friday, 2016-01-08 (assuming the Council approves  the declaratory resolution tonight).

Finally, as a matter of practice, the County Council always requires a memorandum of understanding (MOU) with the recipient of the abatement. This MOU constitutes a binding contract between Monroe County and the recipient of a tax abatement, and specifies in detail the terms of the abatement, including the timeline for the creation of any proposed jobs, criteria for substantial compliance with the terms of the abatement, and any remedies (“clawbacks”) for noncompliance. This MOU would be considered at the same time as the confirmatory resolution.

In summary, here are the relevant dates:

  • Review by Economic Development Commission: 2015-12-17 (Completed)
  • Review by Redevelopment Commission: 2015-12-17 (Completed)
  • First Review by County Council: 2015-12-22
  • Review by County Commissioners: 2016-01-08 (tentative, if  first review by the County Council is successful)
  • Second Review by County Council: 2016-01-12 (tentative, if  first review by the County Council is successful)

Analysis

The property is currently assessed at $62,300 and pays approximately $1080 in property tax per year. The following table summarizes the value of the investment and the 5-year abatement, over a 10 year period. I used estimated tax rates provided by the Assessor’s Office — and made the assumption that neither the property value nor the tax rates would change during the 10-year period.

Screenshot 2015-12-22 07.27.20

There are two numbers that matter most in the analysis of the abatement. The first is the total of the column “Estimated Revenue Not Received”, $21,412. This is essentially the value of the abatement to the property owner over a 10-year period, and is also the revenue forgone as a result of the abatement, assuming the investment went on as planned, without the abatement.

The second number is the total of the Additional Taxes Paid from Investment column, $49,962, which is the estimate of the additional amount of taxes over the status quo that would be brought in as a result of the investment.

These two numbers really can be seen as reflecting the  two different sides of the abatement: the tax revenue forgone (assuming the investment goes ahead) and the additional tax revenue generated by the investment.

In addition, it is useful to look at the two columns labeled Cumulative Without Improvements and Cumulative With Improvements. In particular, these numbers show that even WITH the abatement, the property will be generating more revenue by the second year of the abatement than it would have without the investment.

Tax Abatement within a TIF District Critique

So besides the usual criticisms of tax abatements in general (in my opinion the most salient being that the literature shows that tax abatements have a minimal impact on a business’s decision to make an investment), this abatement is subject to another critique — that it is a tax abatement within a TIF district. Indiana is one of the few (not the only — at least Iowa and Missouri also permit them) state that permits tax abatements within TIF districts, so overall this is a relatively rare and not-well-studied situation.

I’ve heard  this critique take 2 different forms, which can actually be seen as diametrically opposed:

  • A tax abatement in a TIF district is “double-dipping”, as it combines two economic development incentives
  • A tax abatement in a TIF creates two economic development incentives working against each other, because the purpose of the TIF district is to capture revenue from development in the district, and a tax abatement diminishes the amount of revenue for capture

I  reject double-dipping argument, at least  in the general case. Tax abatements and TIF districts are often lumped  together in public discourse as similar economic development incentives. However, they are really very different. While a tax abatement is clearly an economic development incentive that works to the benefit of an individual business/investor by reducing the amount of new taxes paid by the business, the TIF district  serves to provide infrastructure that makes particular parcels of land broadly develop-able. Any business that is going to expand or site at a particular location will generally only do so if there  is existing infrastructure.

So the benefit to an individual business owner  of being in a TIF district is simply having access to land with infrastructure. But this is not a particular benefit beyond any other land that has infrastructure that is outside a TIF  district. The benefit of a TIF district accrues more directly to the unit of government that created the TIF  district — the ability to raise revenue to put in infrastructure to support employment.

Incidentally, I’m not saying that double-dipping couldn’t occur in a specific case.  A redevelopment commission could choose to invest in or provide some other sort of direct assistance to a particular property (other than providing publicly-available infrastructure) and then also allow a tax abatement on the same property. However, this is not the case here, and in general.

The second argument — that a tax abatement in a TIF creates two economic development incentives working against each other, because the purpose of the TIF district is to capture revenue from development in the district, and a tax abatement diminishes the amount of revenue for capture — does have some merit — but this merit has to be evaluated on a case by case basis. First, we have to start  from the premise that the goal of the TIF district is not to accumulate as much revenue as possible, but to provide overall benefits to the community. These benefits can include redevelopment of blighted/brownfield land, amenities that improve the quality of life of residents of the community, and employment available to local residents (in urbanized areas, providing housing is an additional potential benefit of a TIF district).

The revenue captured by a TIF district is simply a means to the above purpose(s), in that the revenue allows for the investment in the infrastructure (in particular, pays the bond that created the infrastructure). So in the case of a tax abatement within a TIF, the abatement would only work at cross-purposes with the goals of the TIF district  if it impaired the ability of the TIF  district to invest in the infrastructure necessary to meet its goals. This could mean impairing its ability to make  debt service payments, but could also mean impairing its  abilities to make other infrastructural improvements that aren’t funded through debt.

So as long as the abatement does not impair the ability of the TIF district to make the necessary investments to meet its goals, it does not work at cross-purposes to the TIF district. Again, making this determination requires looking at the specific case. Is the abatement relatively large compared to the overall cash flow of the TIF district, such that it could materially affect that cash flow?  Is the TIF district putting in special infrastructure or other incentives specifically to serve this property? Does the project necessitate special services or greatly increased demands on government? If the answer to any of these questions is in the affirmative, then the abatement could be seen as working at cross-purposes with the TIF district; if not, though, the abatement can be seen as working in concert with the TIF district. If the abatement plays a role in incentivizing the investment (again, it is not a given that this happens), then the abatement can increase, not decrease, the revenue available to make investments in the TIF.

And finally, even if you take an entirely negative view of tax abatements  — in effect, see them as harming all of the other taxpayers — the taxpayers that are harmed  in the case of a tax abatement within a TIF district — are only the other property owners (businesses) in the TIF district. So even if  you take a categorical stance against tax abatements, having the tax abatement in a TIF district actually mitigates the harm done to the other taxpayers AND units of government.

Council Meeting Tonight

The Council will take the first  vote on this tax abatement application tonight. As always, the meeting is open to the public, and will be held this evening (December 22, 2015) at 5:30 in the Nat U Hill room of the Monroe County Courthouse, and it will be broadcast on CATS. Public comment will be taken on this tax abatement application. Hope to see you there!

Public Meeting for Monroe Lake Master Plan

14 Dec

IMG_5342In an effort that appears to have flown completely under the radar, the US Army Corps of Engineers (ASACE) — the owners of our only water supply, Monroe Lake — is in the process of updating the Monroe Lake Master Plan. This is the first master plan update since 1967!

The USACE has hired the engineering firm Woolpert to produce the master plan. I’m attaching the draft plan, as of December 3: MLMP December 3, 2015. Woolpert is contracted to deliver a revised draft of the master plan on January 15, 2016, which will incorporate the public comment received during the planning process.

In order to receive public input, the USACE has an open house planned for December 15 (tomorrow) from 3-7PM in the conference room at the Middle Wabash Area Office at Monroe Lake at 1620 East Monroe Dam Ct.  The public will be able to view the planning efforts so far and make input to the plan.

Overall, the draft master plan appears pretty complementary to the needs of our residents in Monroe County.  The draft plan is long, but the most salient section is 5.0 Resource Use Objectives. In short, the objectives are:

5.1 Flood Control

5.2 Water Supply for the City of Bloomington

5.3 Provide Low Water Augmentation to Salt Creek Drainage Area

5.4 Provide Opportunities for Recreational Use of Land and Water

5.5 Protect and Preserve Natural Resources and Habitats

These objectives seem to preclude (or at least prejudice) a water claim from Indianapolis. I’m also glad to see the “Water Supply for the City of Bloomington” objective listed above the “Provide Opportunities for Recreational Use of Land and Water” objective, even though there is no explicit ranking among the objectives.

However, there WAS one line that opened my eyes, on page 3-3:

“The city of Bloomington withdraws an average of 15 million gallons per day through the Monroe Water Treatment Plant from Monroe Lake. This withdrawal can increase to as much as 23 million gallons per day during warmer months (Bloomington, Lake Monroe). Eight rural water companies (Jones, Diagnostic Study) account for additional water draws from the reservoir. Indianapolis reserves the right to withdraw water in the future, but currently does not do so. [emphasis mine]”

The plan does not elaborate. It does not specify under what authority Indianapolis reserves a right to withdraw water, and it does not specify any process or legal authority for adjudicating any claim if and when Indianapolis might assert one.

I plan to be there, and I hope others who want to make sure that our community’s interests in Monroe Lake are included in this plan. I will also report back on additional means through which to provide public input as soon as I learn more tomorrow.

Local Government Investment in the Life Sciences Industries

30 Oct
Dr. Sengyong Lee Introducing the Indiana Center for the Life Sciences

Dr. Sengyong Lee Introducing the Indiana Center for the Life Sciences

This Tuesday, I had the opportunity to attend the Bloomington Life Sciences Partnership‘s Annual Summit, highlighting the state of the life sciences industry in Bloomington. The event featured an introduction by Dr. Sengyong Lee, the chair of the Ivy Tech Biotechnology Department, along with a panel discussion among representatives of 3 Bloomington life sciences companies of very different sizes: Dan Peterson from Cook Group (approximately 4700 employees in the Monroe County area), Susan Easton from Baxter BioPharma Solutions (approximately 800 employees in the Monroe County Area), and John Morris from Morris Innovative (a startup with 6 employees). The panel was moderated by George Telthorst, the Director of the Center for the Business of Life Sciences at the IU Kelley School of Business.

The panelists highlighted the drivers affecting their businesses, including customers, local supplier networks, workforce, and regulatory issues. They also discussed workforce issues, and highlighted the large number of jobs that are currently available and unfilled, as well as the opportunities for promotion. Workforce issues came up multiple times in the conversation. One comment that I found particularly interesting was that students coming out of high school do not necessarily think of life sciences as a choice for employment; that  students often think of life sciences employment as being only for scientists and engineers, when in reality the majority of employees work in a manufacturing/production environment.

Panelists Dan Peterson, Susan Easton, John Morris

Panelists Dan Peterson, Susan Easton, John Morris

The life sciences industry is clearly of strategic importance for Monroe County, employing more than 4000 local residents in medical device manufacturing and 1750 in biopharmaceuticals (Source: http://bloomingtonlifesciences.com/workforce/data/). And local government needs to be engaged with the regional significance of the industry. The Indiana Biosciences Research Institute (IBRI) in Indianapolis — the anchor of a proposed major tech-centered development on the south side of Indianapolis, aims to bridge the gap between university-based research and corporate research in the life sciences, and represents a major strategic opportunity for Monroe County and central Indiana.

One of the most exciting aspects of this summit, however, was the opportunity to highlight the summit’s venue — the Indiana Center for Life Sciences (ICLS). Operated by Ivy Tech, the ICLS is a state-of-the-art workforce development facility located in Monroe County’s Westside Economic Development Area. In addition to lab and classroom space, the ICLS includes a voluminous 5000 square foot training facility, which allows local life sciences companies to conduct training in a simulated production facility. The real advantage of the ICLS training facility is that it allows companies to conduct realistic training that they could not easily conduct in their own “clean room” facilities.

Indiana Center for the Life Sciences

Indiana Center for the Life Sciences

The ICLS was created in 2007 through a strategic partnership between Monroe County Government and Ivy Tech, that included a $5M investment in the facility by the Monroe County Redevelopment Commission. This investment was funded through Redevelopment District Bonds (2007 Series), with a principal of $5M, and paid by property tax revenues in the Westside Economic Development Area tax increment finance district. The debt is scheduled to be retired in 2024.

Thus far, the ICLS has been a story of successful local government investment in strategic economic development, and has become a valued facility in the local life sciences industry, bringing in millions in additional investment and grant funding.

Redevelopment of Concrete Jungle around Lafayette Square? And an aside on Community Revitalization and Enhancement Districts (CRED)

15 Feb

The Indy Star’s columnist Erika Smith reports on a $2.7M investment over 3 years that the City-County Council just approved for the Lafayette Square area (West 38th Street):

I’ve always found this area (Lafayette Sq in Indy) fascinating in kind of an urban-wasteland sort of way. It will be interesting to see what they are able to do with this CRED investment. With that much already built environment, it will be a tall order for redevelopment. I like the idea of taking up a lot of the unused concrete and putting in grass and trees.

Incidentally this effort follows a kickoff last year to a major rebranding effort for the whole Lafayette Square area that includes gateway sculptures, sidewalk connectors, wayfinding markers, and bus shelters. The architectural firm Schmidt and Associates (which has also done some impressive work in Bloomington, and is responsible for the amazing Mass Ave redevelopment in Indy) is the lead designer. The Indy Star published a picture of one of the gateway markers: Lafayette Square area: Passport to the world.

Fiscal Aside:

The money will come from a mix of local funds, grants, and private investments, and will be funneled through the Local Initiatives Support Corporation. $800K will be provided through revenues raised from the Lafayette Square Community Revitalization and Enhancement District (“CRED”), which captures some state income tax, county option income tax (COIT) and sales tax generated in the district. CREDs are sort of like TIF districts (except that the revenue source is income and sales tax, rather than property tax), and are available for investment in downtown areas and investment in areas that have been severely impacted by an economic downturn or loss of a major employer. Qualified investments in CREDs also entitle the investor to a 25% tax credit (if approved by the Indiana Economic Development Corporation and if the investment is not simply moving operations from a different part of the state).

The first CRED was actually established in Bloomington, in order to redevelop the site vacated by Thomson Consumer Electronics. Now, there are around 9 CREDs around the state, including a second CRED in downtown Bloomington.

References: 

Here are a couple of other interesting references on CREDs:

City of Bloomington Economic Development Commission Meeting Today

23 Jan

Today, the City of Bloomington Economic Development Commission (EDC) will be meeting at noon (2015-01-23 at 12:00PM) in the Hooker Conference Room in City Hall. There are 3 substantive issues that will be covered in the meeting — issues that might be characterized as the good and the ugly in economic development. Unfortunately I don’t have a lot of time to write about this in much detail before the meeting, but will update the public afterwards.

1. Big-O properties (principal Mary Friedman, Bloomington) is requesting a 3-year tax abatement for a mixed-use project at 338 S Walnut Street. I have written about this project extensively before here (City Tax Abatement Request for Mixed Use Building 338 S Walnut St). They are coming back before the EDC because they are requesting to change the plan a bit — to reduce the amount of retail square footage on the ground floor from 2500sf to 1663sf to make room for bicycle storage (in order to make the bedroom to bicycle storage ratio 1:1). This abatement request will need to be approved by the City Council.

2. Cook Pharmica is requesting a 10-year personal property tax abatement for a significant expansion to their vial and syringe-filling business unit. They are proposing to invest $25M in new equipment, which will result in the creation of 70 new jobs, with $3.2M in new payroll. All wages would (and would be required to) be compliant with the City’s Living Wage Ordinance. The jobs would be created between 2015 and 2020. Cook Pharmica is also investing several million in the building to accommodate this expansion; however, they are only requesting the tax abatement on the personal property improvements (the equipment), not the real estate improvements.

The abatement is requested as a 70% abatement over 10 years. The 70% figure was chosen because Cook Pharmica could alternatively take advantage of an automatic 10-year Urban Enterprise Zone tax abatement, which also results in a net 70% savings on the personal property taxes resulting from their new investment, but distributes the remaining 30% to the Bloomington Urban Enterprise Association, the City’s Redevelopment Commission, and the Indiana Economic Development Corporation. Structuring their request as a 70% abatement on personal property tax instead keeps the 30% as being distributed to the taxing units serving the property (i.e., City of Bloomington, Monroe County, MCCSC, Monroe County Public Library, etc.). This abatement would need to be approved by the City Council.

3. Between 1986 and 2012, the City issued business loans through the Bloomington Investment and Incentive Fund (BIIF). There are 5 outstanding BIIF loans, of which 4 are current. The remaining loan was made to XfiniGen — a company that proposed to build the “next generation lithium batteries for large scale energy storage applications”, and proposed bringing 107 jobs to Bloomington. The company folded, and has left $37,464.07 in principal outstanding. Their last payment was in November 2013. The City is proposing that this remaining debt be written off, as there is little to no chance of collection. The memo in the packet about this situation provides some more detail about the company and the City’s attempts to collect the debt.

The full packet can be found here: Bloomington EDC Packet 2015-01-23