Archive for Thursday, January 14, 1993

MULTIPLE TAX ABATEMENTS FOCUS OF TASK FORCE DEBATE

January 14, 1993

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Should the city grant property tax breaks only when local companies need them as a condition of expansion? Or should an abatement be granted to help a company's long-term growth regardless of the immediate need?

Those were just some of the questions that local businesses and city officials grappled with during a meeting Wednesday of the city's Economic Development Advisory Council. The meeting served as a forum on the issue of multiple tax abatements, and representatives from about 15 local companies that have received such abatements attended.

The city in the past has granted multiple tax abatements to local companies, using a statistical model to figure the potential benefits and drawbacks of granting tax abatements over a several-year period.

Commissioner John Nalbandian said that regardless of what the model indicates, perhaps the commission should be asking applicants if the abatement is absolutely necessary for them to expand.

"What becomes more and more important is the question of would they grow anyway without the tax abatement," Nalbandian said. "We don't ask that question in any depth now."

NALBANDIAN said he has sensed that companies requesting tax abatements don't want to be put under intense public scrutiny. However, he said, "The people are going to expect that you ask the question, `Why?' To me, that is the inevitable outcome of granting multiple tax abatements."

Tom Welsh, vice president and chief operating officer of The Garage Door Group, a local company that has received two 10-year, 50 percent tax abatements, said he would have no problem spelling out his reasons for requesting tax abatements.

He disagreed with Nalbandian that the primary question should be, "Would a company expand even without a tax abatement?" Welsh said tax abatements can help local companies over the long run by helping them remain competitive with companies outside the state, where more liberal tax incentives often can be found.

WELSH SAID that while his company has been granted 50 percent tax abatements here, some of his competitors in other parts of the country have received 100 percent tax abatements.

"Over time, those things catch up with you," Welsh said. "You've got to level the playing field so you can compete with businesses in other parts of the country."

But Charles Krider, a member of the advisory council, said he thought tax abatements should be used primarily to influence a company's decision to expand.

"Are we affecting the behavior of a company? Or are we giving a general subsidy to all businesses?" Krider said. "If we're not affecting behavior, why are we spending tax dollars?"

Krider said he thinks the city should develop a more detailed policy for granting abatements, especially when they are for replacing equipment as opposed to hiring new employees.

Some aspects of a tax abatement policy might be taken entirely out of the city's hands: Some Kansas legislators are discussing a bill to leave school property taxes unaffected by local tax abatements since the state now uses a uniform, statewide property tax levy to fund schools statewide.

Dwayne Peaslee, chairman of the advisory council, said the issues raised Wednesday could assist the council in making recommendations to the city commission.

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