FORT WAYNE – In July, the Fort Wayne City Council did something it had never done before: It exercised its power to revoke tax breaks for companies that didn’t live up to their job-creation promises. At least, members thought they did.
It turns out, council members learned Tuesday, revoking property tax phase-ins is more complicated than they realized.
The tax breaks, formerly known as tax abatements and now called tax phase-ins, freeze the tax on a property where a big investment is made and then phase in the increased taxes gradually.
Some can be worth hundreds of thousands of dollars in tax savings over time, but as the council has increased the number of phase-ins granted, the number of companies that didn’t come through on the investment or the number of jobs they promised has grown.
In July, when the council was to do its annual approval of the list of abatements so the companies could take the deduction on their property taxes, members removed about a dozen from the list because they were not in compliance, having either not filed their paperwork or not met their obligations for investments or job creation.
Unfortunately, council attorney Joe Bonahoom said, simply not approving them was not enough, because state law requires the council to take action in finding the companies non-compliant and give them 45 days to address the issue.
When you omitted them from the list of approvals, you essentially took no action, Bonahoom said. Statutorily, by taking no action, we approved them.
So for the most part, the tax breaks will continue. But Bonahoom said the companies are now on notice that if they are not in compliance next year, the city will take active steps to remove the tax phase-in.
To correct the situation, the council approved a package of three measures Tuesday. One continues the abatements for 12 projects that council members thought they had revoked, and another continues them for five companies that had filed their paperwork on time but with the wrong office. A third measure removes four phase-ins from companies that moved or got rid of the equipment they had a tax break on and from six that never filed their paperwork for the phase-in.
Bonahoom said that, in his opinion, since those companies never filed the paperwork to get the phase-in, there is no requirement for notice and 45 days to answer, and the tax break can be revoked immediately.
They’ve got to comply, they’ve got to do what they say they’re going to do, said member Geoff Paddock, D-5th. This is an important first step.
John Crawford, R-at large, who has been a critic of many phase-ins, said the situation proves the city never intended to force companies to live up to their promises.
This shows how careful we need to be when granting these, because when it comes time to take them away, we don’t even know how to do it because we’ve never done it before, Crawford said.
In the next item on the agenda, the council approved a seven-year tax phase-in for Fort Wayne Industrial Properties, 4817 Industrial Road, expected to save the company about $95,000.