Tuesday, September 15, 2009

City Doled Out $1.6 Billion In Incentives To Eli Lilly

I had no idea the actual size of the tax incentives the City of Indianapolis doled out to Eli Lilly when it announced "major expansions" and "commitments" to the City back in 2004 when Bart Peterson was still mayor. Check out this little item in today's Star where it mentions $1.6 billion in tax breaks and incentives being awarded to the company:

From 1999 to 2004, the expansion added about 9,000 new Lilly jobs in Indianapolis and secured more work for the company's 7,000 vendors in the state.

Since 2004, Lilly has shed 2,000 jobs and never reached the target of adding 9,500 new jobs in Indianapolis by 2009. That target was set in 2004 when Lilly applied for tax breaks and incentives totaling $1.6 billion in exchange for its expansion.

Scaling back now has little to do with the recession. Lechleiter said the restructuring would have happened anyway, to speed up the pipeline, which has sputtered in recent years.

Spending on prescription drugs has been impacted very little by the economic downturn. Lilly's Lechleiter readily admits that these latest job cuts have nothing to do with the economy but is simply a restructuring by the company. Roland Dorson, the Greater Indianapolis Chamber of Commerce President who is always lobbying for higher taxes and more incentives to lure more low-paying hospitality jobs to the City, totally understands Lilly's move. "They've got to do these things to prepare for the future," Dorson told the Star.

It is obvious that Lilly has completely defaulted on the job creation pledge it made to the City in order to win $1.6 billion in public subsidies. The man who brokered that deal on behalf of city taxpayers, Bart Peterson, is now a highly-compensated senior vice president for the company. Now, if you're one of those Lilly workers who loses his job and is unable to pay the property taxes on your home, is the government going to forgive your payment of property taxes? No. The government will expect you to pay every dime it is owed. Shouldn't Lilly be held accountable for failing to fulfill its promise to the City and asked to repay its incentives? Yes. Will it be held accountable? Of course not.

And then there's this little statute:

IC 6-1.1-43-3
Forfeiture of incentive
Sec. 3. If a recipient of an economic development incentive fails to comply with the wage and benefit levels that the recipient proposed or promised to obtain an economic development incentive, as determined by the entity awarding the economic development incentive, the recipient forfeits the economic development incentive as of the date of the determination.


Paul K. Ogden said...

Gary, I can just see the Office of Corrporation Counsel enforcing that statute against Eli Lilly and the Simons, can't you? And pigs might fly some day.

Unigov said...

It's called Clawback.

The former mayor works for Lilly. The former Lilly exec-VP is governor.

$1.6 billion is a lot of money to steal.

Jason said...


What are the terms on the tax incentives? Is it possible that they are long-term incentives received over 10,20, or 30 years? It may work out that Lilly is (or will) giving up the incentives going forward. I think that is important in understanding the full scope of what is happening.

Paul K. Ogden said...

The Bird,

I can't think of one example where any company has ever given back an incentive.

Jason said...


I'm not talking about giving it back. I'm thinking that maybe it is earned going forward. I doubt they got $1.6B up front. It could be possible that they won't earn the incentives going forward, so the entire $1.6B won't be realized.

dcrutch said...

I'm usually very unforgiving about not being square with the taxpayer. However, I wouldn't exactly rank Lilly up there with the CIB, Colts and Pacers, given the money Ruth Lilly and company have donated over the years. If Lilly is some sort of den of thieves compared to the crew that runs professional sports in this town, please correct me.

indyernie said...

If I understand this right...when Lilly doesn't produce the jobs promised the city can negate the agreement and start collecting the taxes.
The question is ...will Indy pursue these funds? I hope so.

Paul K. Ogden said...

Man, I agree with Indyernie. The world is ending.

I would also agree with dcrutch that Eli Lilly should not be in the same category as the Pacers, i.e the Simons. I think Lilly has contributed a lot more to the city than the Simons and gotten less in return than the Simons.