Evansville Courier & Press
Berry Plastics has been one of the leading corporate citizens in Evansville. A manufacturer of plastic containers, prescription vials, plastic bags and other consumer products, Berry employed 1,213 people at its Oakley Street plant last year, up from 1,160 two years earlier. The company and its employees have supported a number of charitable efforts locally.
That said, it is presumptuous for Berry Plastics to request tax abatement now on its tool-shop expansion already under construction on Locust Creek Drive north of Evansville.
A tax abatement is an economic incentive that allows a company to pay a reduced property tax bill during the early years of an industrial expansion or relocation project. Designed to help offset huge start-up costs, tax abatement is intended to encourage a company to make an investment it otherwise would not make. The idea is that companies apply for such incentives from the city or county before starting work on a project - not after.
Berry clearly was able to start building its replacement tool shop - which is expected to cost $1.1 million for the addition itself and $1.86 million for the new equipment - without abatement. It began construction in March but didn't apply for tax abatement from Vanderburgh County until June. The project already was 75 percent to 80 percent completed before the County Council heard the abatement request Wednesday.
Though it's commendable in this economy that Berry Plastics would build an addition to replace its tool shop near Chicago - creating 18 local jobs - its asking for abatement at this late date is a misuse of the economic incentives program.
Tax abatement can benefit the community because ultimately local government collects more property tax dollars from a developed property - albeit on a delayed basis - than it would from an undeveloped piece of ground. Tax abatement is not an entitlement, however. It is available to businesses only, not to individual taxpayers. In exchange for local government not recouping full property tax revenue from a company for several years, the company makes certain promises about investment and staffing levels. If a company fails to live up to those promises, the local government has the legal right to rescind the abatement and demand full payment of taxes, though in practice that occurs rarely. The point is, abatement of property taxes is a privilege, not a right.
Moreover, Indiana cities and counties now must be far more vigilant about tax abatement compliance. Under the new property tax circuit breaker law, House Bill 1001, local governments are being forced to collect less revenue to fund police, fire protection and street maintenance. If municipalities extend generous tax breaks to companies that don't truly need them, they are just leaving money on the table.
Vanderburgh County Council members on Sept. 10 will consider whether Berry's job-creation efforts justify waiving the requirement that companies apply for abatement before starting projects.
Granting Berry an abatement hardly seems fair to other businesses that don't seek to bend the rules. The eligibility period for applying for incentives cannot be indefinite.
Based on a points system, Berry is seeking a nine-year tax abatement on its equipment and an eight-year abatement on its real estate. We think its full property tax obligation ought to kick in much sooner than that.
To set an example for other applicants, if the County Council approves abatement for Berry, then the savings ought to be cut by half, phasing in the full taxes over four years for real estate and over four and a half years for equipment. And the tax break should be no longer than that.