Published: June 27, 2009 06:56 pm         

Tribune-Star Editorial: Officials must be careful enforcing abatements

Doing business carries an element of risk. It’s a key part of the formula that produces success and, therefore, wealth. Smart planning, good research, wise choices and hard work minimize that risk, but it’s impossible to eliminate.

The same is true for a community’s economic development programs and strategies. In order to enhance an economic climate in which businesses can flourish and good jobs are created, a community takes risks by investing in itself and providing incentives to encourage entrepreneurs, lure business prospects and keep existing businesses in place.

Among the common tools used by communities to fuel an economic development engine are tax abatements — government-induced property tax breaks for facility construction or new equipment purchases and installation. Tax abatements generally last for 10 years and gradually decrease through the period until the owner is paying a full property tax bill.

Tax abatements have always been somewhat controversial because they are inherently unfair to other businesses in a community that continue to pay full price on property tax bills. The tradeoff is when one business flourishes, others also will flourish. Success breeds success. So government leaders are willing to give one entity a break in order to help it succeed and, ultimately, benefit the entire community.

Economic development is a competitive arena. As long as one community is willing to take risks and provide incentives, others will follow suit in order to keep up, even if they find some to be distasteful.

Being known as a business-friendly community is important to economic development. With that in mind, we encourage Terre Haute’s and Vigo County’s elected officials to tread lightly in their current efforts to review tax abatements and evaluate whether those receiving them are living up to the job-creation promises made when obtaining them.

In the interest of full disclosure, the Tribune-Star has participated in the tax-abatement process. In the mid-’90s, the company was approved for an abatement on its downtown office building but did not use it. A few years later, however, the Tribune-Star did obtain and exercise an abatement on its new production facility on Margaret Avenue.

From a business development standpoint, the community has benefited from the new production facility. Advanced technology could have permitted the newspaper to build its plant in another county — or even another state. The tax break provided important incentives for the company to keep the facility in Vigo County.

The Tribune-Star fulfilled its jobs-related promises in the abatement. Unfortunately, not all affected businesses have been able to do so, especially with today’s economic turmoil.

We find no fault in city and county leaders seeking accountability from those who have been awarded lucrative tax breaks. In fact, as they have pointed out, the review process is part of state law. Even if it were not, it’s smart to scrutinize all functions of government.

In this instance, there is much at stake. If not handled fairly and in keeping with a community’s overall economic development vision and philosophy, the all-important business climate could be poisoned in such a way that it deters future progress.

So far, city and county leaders have struck an appropriate chord. The city already met once to begin reviewing its abatements. The county will begin conducting compliance hearings on Tuesday.

Despite risks associated with abatements, they are useful tools in the campaign for economic growth. They should be handled as such, and there should be no doubt for business prospects that they are entering a community that values economic progress and the benefits it brings.