Friday, July 8, 2011

Navistar/Pure Power Abatement Illuminates New Law - New Bad Law

The Metropolitan Development Commission is in the process of granting Pure Power, a Navistar company, a 7 year abatement amounting to about $897,712.76, or a 62.1% savings.  The MDC will hold a public hearing on this abatement at their regularly scheduled meeting on July 20.

The abatement resolution and statement of benefits estimates that Pure Power would retain 30 jobs, create 200 additional jobs by 2013, and invest $19 million in new equipment.

I send my readers over to Advance Indiana for a detailed look at the abatement failure of Navistar and clawback implementation of $5m of that abatement in his entry "Ballard Administration Continues to Bleed Taxing Districts With Abatements".  Scott Olson, reporter for the IBJ, published information about the abatement and Navistar's history in "Navistar seeks more tax breaks after old deal failed".

What caught my eye and got me to uttering "HUH?", was in the Star report by Ted Evanoff, "$19M upgrade to preserve 200 jobs at Navistar foundry".   The sentence was near the end:
"Over the seven years [of the abatement], the company would save $897,712 in property taxes and pay $574,879."
That's over half.  I hoped that was a typo of some sorts.  But, alas it was not.  [edited to add: the MDC is not considering utilizing the new law with this abatement.  The schedule they are considering is what the old part of the Indiana Code dictates for a 7 year abatement]

Long story short, the last Legislative session enacted a new law that is so watered down that abatements look to be ripe for the plundering and could result in 10 year, 100% abatements.

If you want to read it for yourself:
IC 6-1.1-12.1-17

Alternative deduction schedules

Sec. 17. (a) A designating body may provide to a business that is established in or relocated to a revitalization area and that receives a deduction under section 4 or 4.5 of this chapter an alternative abatement schedule based on the following factors:

(1) The total amount of the taxpayer's investment in real and personal property.

(2) The number of new full-time equivalent jobs created.

(3) The average wage of the new employees compared to the state minimum wage.

(4) The infrastructure requirements for the taxpayer's investment.

(b) An alternative abatement schedule must specify the percentage amount of the deduction for each year of the deduction. An alternative abatement schedule may not exceed ten (10) years.
The new law originated with HB1007.  The original language laid out a specific manner in which the percentage of an abatement could be calculated, based on the size of the investment, number of new jobs created, average wage of new jobs, and infrastructure already in place.  These rules were struck from the bill almost immediately.  It is now up to each city or county to determine. 

Lest you think the rules in the original language were tough...  Under those rules, Pure Power/Navistar would have qualified for a 10 year abatement, with 100% of property taxes forgiven for each of the first 7 years, 75% forgiven for year 8, 50% for year 9, and 25% for year 10.
This bill did a number of other things as well.  More on that later.
This past legislative session was nothing to be proud of.  Now the taxpayers can expect even bigger chucks of tax dollars given back to big business in the form of higher and higher abatements.

No comments: