Some residents have questioned why Amazon, one of the largest and most profitable companies in the world, is benefiting from tax breaks at its new 1 million-square-foot warehouse just off Interstate 65 in Merrillville.
The town did not give tax breaks directly to Amazon for building the massive new warehouse just off the highway, but did give developer Crow Holdings a 10-year property tax abatement on its 196-acre Silos at Sanders Farms business park. An abatement phases in property taxes over a decade, with no taxes owed for the first three years.
The development also got a $1.7 million utility reimbursement and a $1.41 million Regional Economic Acceleration and Development Initiative, or READI, grant from the state.
The tax breaks have been used in the marketing materials to promote Silos at Sanders Farms, where Panduit also recently opened a $76 million distribution center.
Merrillville officials said the incentives paid off.
"I would offer the same incentives all day, every day," Town Councilman Shawn Pettit said.
Some economic development experts say that workforce, location and other factors ultimately influence where businesses choose to locate, expand and invest. But property tax abatements have become the norm in Indiana, with communities offering them almost automatically for fear of losing out on economic development projects to other communities.
Proponents say cities and towns ultimately end up bringing in more tax revenue over the long term by bringing in more assessed valuation from factories, warehouses and other businesses they otherwise wouldn't have.
"There have been some people in my 22 years, and just recently, who have questioned the incentives and what we do in economic development," Pettit said. "I would do this every day again and twice on Sunday to grant real and personal property taxes to a company like Amazon or Crow Holdings."
Tax breaks have helped lure two business parks with 700 acres, and more than 3.5 million square feet of industrial space to Merrillville, Pettit said.
"Amazon themselves did not ask for tax incentives," Pettit said. "We gave real property tax incentives to Crow Holdings. When they went out and marketed it, they said when we do a lease with you, it's going to take into account the tax incentives we were granted by Merrillville."
Hillwood Urban President Mike Berry, a developer who helped lure more than 500 companies to the master-planned Alliance Texas industrial airport, recently told a One Region luncheon crowd that tax breaks were not as critical as considerations like workforce and educational quality to ensure a pipeline of skilled enough workers.
"Talent in a region is the most valuable incentive for a region to offer today, more so than tax incentives, more so than infrastructure. Companies will tell you those incentives are meaningful, but they're a one-timer," he said. "Tax abatements can go a long time, but those are generally BBs in a washtub compared to workforce."
Tax abatements are so commonly used in Indiana because of how competitive economic development is, Indiana University Northwest Professor of Business Anthony Sindone said.
"Offering tax abatements is a tool often used to incentivize economic development projects. They are not the only tool, nor are they the only recruitment tool used by economic development organizations. Economic development is quite a competitive business," he said. "Many of these organizations use any and all tools and resources to recruit new business development. If one region’s economic development organization decides to forgo the tools at its disposal, they might find that they are at a competitive disadvantage compared to other regions."
Communities risk losing out on projects if they do not offer tax breaks that could reduce the cost of doing business by millions of dollars, at least at first, Sindone said.
"If the region in question possesses characteristics in great demand by the companies looking to locate there, then they will demand fewer incentives such as tax abatements," he said. "Otherwise, holding everything equal, regional economic development organizations could lose projects to other regions if they do not offer incentives like tax abatements."
Tax breaks incentivize jobs and investments but can reduce tax revenue that funds police, fire and other municipal services if the company just would have come anyway, Sindone said.
"Tax breaks are just tools," he said. "Companies look at much more than abatements. We find that the workforce, utilities, geography, quality of life amenities, etcetera play huge roles in the decision to locate to a particular region."
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