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Chad Kline has an idea about tax abatements. Maybe, just maybe, Wells County should be a little more selective.

Kline came to the Bluffton Common Council meeting on Tuesday night to introduce himself to the council members. And as a by-the-way idea, he passed out a proposal for a grading scale for tax abatements.

Tax abatements are generally given to any commercial concern – rarely, however, to retail operations – that invests in equipment or real estate improvements. In requesting an abatement, the business tells how much money will be spent and how many jobs it expects to add to its payroll (or preserve on its payroll). The primary taxing unit where the business is located can decide whether to abate taxes for five years or 10 years – or, if it so chooses, not at all. Abatements occur on a sliding scale – for 10 years, the length of the typical abatement, taxes are billed at 10 percent after the first year, 20 percent after the second year, and so on until the tax bill is 100 percent after the 10th year.

Businesses that receive tax abatements must return every year to have their status reviewed by the granting authority. If the company expected to add 10 jobs and hasn’t added any, council members will generally ask why.

Kline comes from Noble County, where he has served as a commissioner, and the Noble County Council uses a point system for scoring abatement proposals. He presented a point system to the Bluffton council Tuesday night to give the council members something to think about. As he introduces himself at other government agencies – the Wells County Council and the county’s smaller municipalities – it’s expected he’ll present the idea as well.

It’s just an idea, Kline said, but he apparently believes it has merit.

“I’m not going to the boards and saying I think we need to do this,” he said, “but this is their town and these are their taxes. I’m asking them to consider it.”

The checklist has nine different categories – total capital investment, job retention, new job creation, average wage, employee fringe benefits, furtherance of development objectives, community benefit, community commitment, and deductions.

In capital investment, for instance, $10 million or more gets a maximum of 25 points, $5 million to $9,999,999 gets 20 points, and so on down to $499,999 or less, which gets 5 points.

Some categories can be done on a sliding scale. In community commitment, for instance, 15 points are possible, with up to five points given for the answers to three questions: Is the applicant located in the county? Will the applicant be an active community partner? And, is the offering of tax phase-in necessary to induce the applicant to make its investment in the county?

Deductions come from two items: If the applicant is new to the county, will it compete with an existing industry in its end product and possibly damage that existing industry? Or, if the applicant requires new infrastructure, what is the cost/benefit ratio for the project? Either item could knock 10 points off of the application’s total score.

The maximum number of points available is 151. Any application scoring 115 points or better qualifies for a 10-year tax abatement. The lowest category is 3 to 8 points, which qualifies for a three-year abatement. Three points and lower equals no abatement.

“One of the benefits is that it rewards those who invest more,” Kline said during an interview in his office at the Arts, Commerce, and Visitors Centre. As things stand now, he said, “Somebody who comes in with low investment and low wages is getting the exact same incentive, essentially, as someone who comes in with a major investment with high wages. We’re rewarding those who do little the same as those who do a lot.”

If Wells County tightens its scrutiny on tax abatements, it is possible that companies could go to another, nearby site where the standard 10-year abatement is routinely given. That would allow potential businesses to bypass Wells County’s scrutiny.

Kline doesn’t think it would chase away potential businesses, however.

“I think we’re just holding them a little more accountable,” he said. “I think this is where the communities really need to consider if this is what they want to do. I’m not saying that they need to do this; I’m saying that the counties need to weigh if this is a decision they want to make. Do they want to be a little more particular in how they’re going to offer abatements?

“It comes down to – if a company wants to invest, then they’ll accept this abatement formula,” he added. “If this is really the community they want to be in, to be a steward of the community, because essentially abatement takes away taxes. We have good businesses out here and I think we want to continue to have these good businesses.”

Article by Dave Schultz, Courtesy of the News-Banner