By JUSTIN SCHNEIDER, Herald Bulletin
With a $46 million incentive package attached, Anderson’s new Nestle Corp. project may sound like a costly proposition.
Together, Anderson and the state of Indiana lured Nestle into Madison County with a commitment to beef-up roads, improve utilities and forego certain taxes and fees. But the city is in no danger of going broke as a result.
“This isn’t money that’s coming out of the city coffers,” said Board of Public Works Chairman Rob Sparks. “There is no city dollars or rate-payer dollars going into this project with the exception of (tax increment financing) and tax dollars generated by the project itself. It’s a great deal for both the public and the company.”
On Monday, Nestle announced its intention to invest $359 million in the creation of an 880,000 square-foot factory and distribution center on the city’s south side. The project is expected to bring in 300 much-needed jobs at an average wage of $19.50 an hour.
Instead of digging into its own pocket, however, Anderson is deferring payments from Nestle as an act of good faith. Incentives are a natural part of the negotiation process: Communities give up tax dollars and speed up infrastructure projects in exchange for job creation and other economic stimuli.
“The idea of how much does it cost us if they don’t come, those are actually the higher numbers,” Sparks said. “We need job creation and we give them some of the tax dollars back to facilitate that plan.”
Sparks does not expect Anderson to gain a reputation for wildly lucrative packages, but rather, to benefit from its willingness to work with corporations. He said the Nestle announcement has already prompted inquiries from other prospective investors.
“I think the expectation it creates is that Anderson will facilitate the necessary infrastructure to fulfill the corporate need,” he said. “It’s not a big payday for them to come in here, it’s more of a joint partnership.”
In a recent article, the Indianapolis Star examined recent corporate announcements, breaking down incentive packages to the cost per job. Honda Motor Co., for example, garnered $141.5 million in incentives for its new 2,000-worker Greensburg plant, which translates to $70,750 per job.
With Anderson’s $46 million incentive package to Nestle (plus $7.8 million from the state) and the expected creation of 300 jobs, the incentives per job add up to nearly $180,000. But Corporation for Economic Development Executive Director Mary Starkey calls that $46 million figure misleading.
“What was surprising to me is that (the Star) considered the 10-year tax abatement, which is based upon the investment that a company makes,” Starkey said. “That’s a minimum bar any community in the U.S. is going to offer as an incentive. If you don’t offer a 10-year tax abatement, it’s a clear signal that you don’t want the business.”
Besides, she said, to consider an incentive package in terms of dollars per job is an antiquated way of thinking.
“The characteristics of advanced manufacturing is that it’s a highly automated system,” Starkey said. “It’s a much higher capital investment with fewer jobs, but they are more high-skilled and higher-paid jobs. To base all your incentives on job creation is old-fashioned thinking, old-line manufacturing thought. We need to get with the 21st century.”
Anderson will spend $4 million in tax increment funds to improve roads and another $4.8 million to build a new electrical substation. An $8 million bond issue will help pay for construction. Other funds will go to a railroad spur, drainage ditch, new sewer line and $1 million in fees and permit costs will be waived.
Starkey said these costs are minimal when compared with what Anderson has to gain.
“The fact that a company the quality of Nestle has come here speaks very highly of Anderson,” Starkey said. “This will help our needs and it’s something everybody in the community should be proud of.”
Weston Sedgwick, media relations manager for the Indiana Economic Development Corp., said looking at incentives on a per-job basis is myopic. It doesn’t take into account the big picture.
“Incentives were a big part of Nestle’s decision, but it’s difficult to look at incentives on a per-job basis,” Sedgwick said. “There are lots of ways to incentivize a project and improving infrastructure is something that’s going to help the city for future projects.”