As reported in the Elizabethton Star, the Elizabethton City Council and
the Carter County Commission have recently approved an incentives policy to
promote the growth and recruitment of new industry and businesses to
Elizabethton and Carter County. I’ve had a few people ask what the policy was
all about and why do we even need an incentives policy, so I thought I was
write about it.
The policy that the Council and the Commission passed, gives
the authority for the respective Industrial Development Boards to give
incentives to companies meeting certain requirements. These include things like
hiring a minimum number of people and providing health care and a retirement
plan for those people, building an addition to an existing facility, and
expanding equipment at the facility. Additionally, this policy also gives these
same incentives to tourism-based businesses – which is now unique only to
Carter County in Tennessee.
Having this policy in places gives companies and economic
development staff the assurance that incentives can be offered. Essentially,
most companies don’t want their business aired in a public meeting – especially
if they’re negotiating on an expansion – to help protect their stock-holders
and prevent their competition from finding out. Without this policy in place, every
time a company wanted an incentive they would have to go before City Council to
negotiate one agreement and before the County Commission to negotiate another
agreement which may be vastly different. This policy streamlines this process
for the business.
It’s also beneficial for the government and tax payers in
that we’ve developed the policy based on what the true return-on-investment of
the business will be to the tax base. Unlike some incentives in the past, where
we’ve arbitrarily given all the property taxes away with little to no
consideration to the fiscal impact on the city and county, this policy takes
those elements into consideration. It offers a workforce incentive based on
existing ratios of workers living in Carter County, payroll to sales tax, and
city to county sales tax. This looks at return-on-investment by ensuring what
the city and county give in workforce incentives comes back in the form of
sales tax revenues.
A similar analysis was done (albeit much easier to
calculate) with real property and personal property taxes and in these incentives,
we only incentivized the increase in the property taxes that would have been
paid on the expanded building or new equipment – like tax increment financing.
This helps ensure that the city and county will continue to receive the
revenues they have always received from these businesses in order to pay for
the public services that they still consume.
Lastly, to prevent the incentives from getting too
out-of-hand, we have capped them at 40% of what the existing company already
pays in taxes. Keep in mind, that an industry may pay $40,000-$100,000 in
property taxes annually and when the city or county decide to fully abate their
taxes the government lose all that money at once – which could easily be a 2-3
people’s salary and benefits. Capping the incentive at 40% of will ensure that
the company will pay at least 60% of what they’ve always been paying in taxes
while still giving them relief on any capital expenditures.
This policy was intentionally written to protect the
tax-payers while incentivizing existing and new companies and its adoption
serves as a win-win-win for the companies, governments, and tax-payers. Let’s
talk about it!
