A tax-incentive request by a former Fort Wayne City Council member could highlight an ongoing debate about whether the city ought to tighten its standards for firms that want tax breaks.
Former Democratic councilman Tim Pape, who is managing partner of the Carson Boxberger law firm, says the firm will likely ask for reduced taxes on new information technology and other equipment when it moves into the downtown Harrison building, an $18 million commercial and residential development set to open in early 2013.
“If our investment reaches a level that makes sense, we'll certainly apply,” Pape said, adding that the reduced taxes could help the firm keep high-paying jobs downtown. “Of very high and important value to our business is the future development of downtown Fort Wayne.”
But the request – which Pape said has not been finalized – would come at a time when the city's policy on tax incentives remains in flux. And lingering political questions on the long-delayed, tax-subsidized Harrison project could add another dimension to the debate if and when a request comes before council.
Pape said he did not think council would make the abatement a political issue but that the discussion could be interesting from multiple angles.
“I do not believe council members will make it political just because of me or my firm,” Pape said. “But it's a high-profile space, the Harrison has a lot of history behind it, and I've got a history too with council.”
Tax abatement, also called tax phase-in, is a tool meant to lure new companies or get them to expand locally by offering a temporary reduction of taxes on new property. In theory, this helps Fort Wayne compete for desirable jobs that otherwise might go somewhere else. But some critics have said the benefits can too often go to firms that already rely on local customers and would not likely leave Fort Wayne anyway.
"If professional services are already in Fort Wayne, and they're already serving people in Fort Wayne, they're not going to do it or not do it just because they get a tax break," said Councilman John Crawford, R-at large. "If they're just serving a market that's already here, I don't see what good a tax incentive does."
New policy changes proposed by a joint city-county tax committee leave the door open for professional services – such as dentists, doctors and lawyers – to get tax breaks, though the job-creation standards could tighten, possibly making it more difficult to gain council's OK. The new guidelines could be up for approval by the city and county in February.
Another central question is whether professional firms can export their services to outside markets – the way a manufacturing plant or distribution center can – or simply tap in to an existing customer base already being served by other local businesses.
“The more advantageous businesses are those who can create jobs and export their business beyond Allen County,” said City Councilman Russ Jehl, R-2nd, who serves on the tax panel. “Your dentist office who will just be siphoning off patients from other dentists, they're going to have a much more difficult time getting an abatement.”
Under the panel's recommendations, 10-year property tax phase-ins would likely be reduced on all businesses – not just professional services – as the city and county try to minimize the burden on other taxpayers. When companies pay less taxes, other taxpayers make up the difference.
Professional services firms that rely largely on local customers would get lower marks under an updated scoring system, reducing their chances of getting tax incentives, according to the panel's recommendations, which were released this week.
But Pape pointed out that today's technology makes it harder to define a firm as strictly local. While Carson Boxberger does not have offices outside Indiana, technology is creating more opportunities to do business with regional, national and even global clients, he said.
“Our office increasingly is serving clients we don't know, we've never met, that don't live here,” he said.
Several City Council members – including those who have opposed or abstained on votes regarding recent tax abatements for professional services firms – said they would consider requests by Carson Boxberger and other companies on their merits.
Councilmen Jehl and Tom Smith, R-1st, each voted against two recent tax abatements for professional services firms – one for a dentist's office, the other for an ophthalmologist – according to records kept by the city clerk's office.
“It's not easy, it's not perfect, but clearly there are going to be more and more professional services asking for abatements,” Smith said. “The pressure's on to be business-friendly.”
Jehl declined to discuss possible tax incentives for Carson Boxberger, while Smith said only that he hoped the request would come after the new tax policy takes effect sometime in early 2013 so that council would have a clearer set of guidelines.
Councilman Crawford has abstained from recent votes on tax abatements for professional firms but has generally been critical of how loosely the benefits are awarded. He acknowledged that a Carson Boxberger request would make an intriguing case study in local tax policy.
“That'll be a fun one,” Crawford said.