When government officials give companies tax breaks, they usually expect something in return: new jobs and investment.
But when companies routinely seek large reductions in the value of their properties as determined by county assessors, they can shift some of their taxes into the backs of taxpayers with far less political and economic clout – without having to add a single employee or piece of equipment.
With that in mind, it worth's taking an extra look at two recent tax appeals filed by large corporations: Michigan-based Meijer's, which operates tree “big box” stores in Fort Wayne; and General Motors, which assembles trucks at its plant in southwestern Allen County.
Meijer's is appealing the taxable value of all of its stores in Indiana and 97 of its 140 stores in Michigan. Published reports also make it clear GM's appeals have not been limited to Allen County: In Genesee County, Mich., GM sought more than $430 million in assessment reductions for 2008-2010 before settling on a $250 million cut that reduced its taxes there by more than $8 million.
In Kokomo, GM in 2010 filed an assessed value of $7.4 million on personal property from the former Delphi Electronics plant a year after it had been assessed at $217.9 million.
In Milford Township, Mich., GM sought an 80 percent reduction on the value of its proving ground before settling for a 30 percent cut, saving the company $513,000.And in Marion two years ago, GM contended its economic hardship justified a recovery of more than $2 million in taxes.
As county Assessor Stacy O'Day and her attorney Mark GiaQuinta readily admit,
there is a certain amount of subjectivity in the assessment process, which determines a property's value for taxation purposes. Factors such as construction cost, market value and for commercial properties income must be weighed, and that process becomes even more difficult when – as in the case of GM's local plant -- there is no comparable facility nearby.
So when companies such as Meijer's and GM regularly appeal their assessments, it may be done in good faith and completely legitimate. But unlike Meijer's, GM has been granted numerous tax breaks since its plant was lured to Allen County in the mid-1980s with an incentives package that total would be worth more than $151 million.
Just this year County Council agreed to waive all taxes on $110 million in new equipment for a full decade after it was revealed that a 30-year-old agreement promised GM the largest tax breaks authorized by state law. And, of course, GM received a $50 billion bailout from the American taxpayers in 2009 – taxpayers who are still $9.7 million in the hole, according to a recent report to Congress.
So GM would seem to have a unique obligation to pay all taxes it legitimately owes – and to offer an explanation when it questions its bill.
The settlement calls for Allen County to lower the local plant's value for 2006 and 2007, resulting in tax credits that will reduce local governments' revenues by $600,000. In exchange, the county's assessment for 2008-2012 will remain in place. In 2006, GM placed the taxable value of its property at $48 million, but last year it claimed the plant was worth just $35 million despite the fact that the value of construction permits there totaled more than $276 million between 1985 and 2012. In 2009 the county agreed to reduce the plant's assessed value by 25 percent, from $101 million in 2007 to $75.6 million.
But what is the story behind those numbers? I can't tell you -- disturbing, since the settlement deals with public policy and public dollars.
“We are bound by the mediation agreement not to elaborate beyond the statement,” GM spokeswoman Stephanie Jentgen said, referring to the terse two-paragraph release that contained the bare facts and the self-evident conclusion that “Allen County is extremely proud of its local GM plant and the economic vitality us provides.”
But the undeniable benefit represented by the plant's 4,000 jobs does not justify tax breaks beyond those offered in exchange for other things. “Our job is to treat everyone fairly,” O'Day said.
Like O'Day, GiaQuinta would not discuss the settlement, but he did say the county did its homework before making the deal, doing a “very sophisticated” review of the assessments for similar plants operated by GM and other firms. And one of the things they found, according to attorney Andrew Teel, was this: In some cases, the county did little to question GM's self-assessment and, at times, granted 100 percent tax relief.
Allen County taxpayers, on the other hand, appear to have been well-served in this case. But there will be a next time, with GM, Meijer's or somebody else, and officials should to remember that there's more to the tax-break story than the headlines about new jobs and factories.