Saturday, April 02, 2011

Ballard Administration Now Claims City May Have Lost Rolls-Royce If It Wasn't Offered Tax Breaks For Not Creating Jobs

It's no longer necessary for a company to promise to bring new jobs to the local economy in order to win tax breaks ordinary citizens and small businesses are never eligible to receive. Simply conjure up a hint there is some possibility a company might take its business elsewhere and the public's purse strings open up as far as needed. Feeling the heat of awarding a multi-million dollar tax abatement to Rolls-Royce for creating zero new jobs, the Ballard administration is now claiming the company may have moved its nearly 4,000 jobs elsewhere if the tax breaks had not been offered. The administration is saying that awarding tax breaks so the company would move jobs at its location on Tibbs Avenue to downtown made possible $190 million in upgrades that would have otherwise not been made. The IBJ's Fransesca Jarosz feeds us this latest lie from the Ballard administration:

Without Rolls-Royce being able to make the improvements necessary at Tibbs so they could remain competitive, their long-term viability at that location would be in question, and those jobs would be at risk," said Deron Kintner, executive director of the Indianapolis Bond Bank, the city's debt-financing arm."

"If the site wasn't viable long term, logic would seem to dictate that those jobs would not have remainded in Indianapolis."
Of course, Rolls-Royce, a British-owned company that is relying on federal defense contracts to fund those 4,000 jobs, made no public comment ever suggesting it might move the jobs elsewhere. The company will get not only a tax abatement on the Faris building, which was formerly occupied by Eli Lilly before it started slashing thousands of jobs locally after it was awarded hundreds of millions of dollars in tax abatements by the Peterson administration more than a decade ago, but an even larger $21 million tax abatement for its Tibbs Avenue facilities according to Jarosz. "It's unclear when the company will begin upgrading the Tibbs Avenue plants, but the company expects to complete the work by 2021," she reports. Huh? They get an abatement with a promise to make an investment at some point during the next 10 years?

An ever stranger but not surprising explanation is offered by the mayor's economic development guru. "There's a multiplier effect when you get more high-wage employees in the downtown area," said Michael Huber, the city's deputy mayor for economic development." "They're spending money [and] going out to eat downtown. We believe it also will increase the demand for housing downtown." Somebody is going to have to explain to me how there is more economic development multiplier effect if the same jobs are performed at a downtown location than a location on Tibbs Avenue. It sounds to me like someone is now trying to pick and choose which businesses in which parts of the city get the economic benefits of the jobs already located here. It's really all about pay to play politics, a term that seems almost foreign to the news media in this town.

City-County Councilors Brian Mahern and Angela Mansfield are questioning the deal given that no job creation promises are being made by Rolls-Royce to win the incentives. "Our standard practice has been to require a commitment of jobs," said Brian Mahern. "If they're unprepared to make a commitment, then we're giving them a blank check to spend how they would see fit." "Angela Mansfield said "she doubted Rolls-Royce would move its Indianapolis jobs elsewhere because doing so would be expensive." Community activist Pat Andrews, who normally sides with taxpayers in these debates, apparently thinks giving the abatement without job commitment promises is a good idea. "The size of the investment suggests that Rolls-Royce would be around for awhile after the investment was completed," said Andrews. Well, we'll have to wait about 10 years just to find out if the investment is even made.

The story makes no mention of the fact that one of Rolls-Royce's major contracts with the Defense Department that uses its local labor force is in jeopardy. As the IBJ reported on a week ago, the Defense Department directed Rolls-Royce and GE to halt work on an engine for the F-35 Joint Strike Fighter that is being manufactured locally in Indianapolis and elsewhere around the state, potentially affecting about 2,500 jobs between the two companies, which could increase to 4,300. "The Pentagon in a statement said the stop-work order applied immediately for 90-days, halting the expenditure of $1 million a day for an engine the military has said consistently since fiscal 2007 it does not want," the IBJ reported. "The order doesn’t terminate the program, however, the Pentagon said."

When Ballard ran for mayor four years ago, he complained about the city offering too much in the way of tax abatements and the tax-shifting consequences to ordinary taxpayers. Ballard promised to revamp the City's policies for awarding tax breaks. Instead, he has awarded them just as liberally as his predecessor. As he would now say, "It's the paradigm we inherited."


Concerned Taxpayer said...

When are the so called republicans on the council ever going to look farther than the freebies they get and start DOING THEIR JOBS?

Cato said...

They are doing their jobs. Republicans' purpose is to enrich corporations and to pass laws limiting freedom.

Republicans will be happy when we're all living in company towns, again.

Had Enough Indy? said...

As it was explained to me, Rolls Royce has not applied for either abatement, yet. So, I'm not sure why the City is making hay with this anyway. The 10 year clock would not start until that process was completed. I believe the Ferris building abatement would have to go through the Council and not just the MDC - it certainly would have to if it is within the downtown TIF area (I'm having trouble locating the TIF map on my computer and I just don't remember).

You are right, that the stop work order has been issued. I have no idea what Rolls Royce's situation is if that plane remains cancelled. That could have far more impact on the company's plans than any hoped for abatement. This seems very significant, from the outside looking in.

If the stop work order does not impact the company's Tibbs Street plants that much, then updating the plant can only be good news. That being, it is better to have the company's most modern plants in Indy, rather than its most outdated.

Others certainly can come to a different conclusion than I did - again given the information provided to me. I do have to say that at least one other abatement has been granted with an actual reduction in jobs - the move of Monarch Beverage from Decatur to Lawrence Township a couple of years ago. I was led to believe back then, that investment alone with no promise of additional jobs was not unheard of.

All that said, I do believe it is in the best interest of the public that the underlying public policy be discussed and some common agreement reached. How many jobs, how much new investment, or what combination of the two should warrant a tax abatement. As things stand now, there is no real transparency to the process, and that deserves to change.

Gary R. Welsh said...

Whether it requires council approval or not is irrelevant since this particular council only rubber stamps what the Ballard administration sends before it. You missed my point about it being all about pay to play politics, Pat. Monarch Beverage passes out a lot of campaign contributions to the politicians locally. No need to prove economic development to win favored tax status in this city. Stuff money in the right people's pockets and you get pretty much whatever you want.

Had Enough Indy? said...

Gary, I certainly can't say who greased what skids on this or any abatement. We are all sort of spitting in the wind on this one, since no abatement has been applied for and no hard documents exist - so relevant clawback clauses cannot be examined for appropriateness.

Even if this supposed deal was tainted just as you say, it begs the question of when an abatement should be granted.

This is an important public policy question, even if this administration is crooked. What of the next administration and the one after that?

Should we ever give an abatement? If so, for what? Those are important questions that the Rolls Royce abatements bring up, as far as I'm concerned.

Gary R. Welsh said...

Pat, Unless I'm totally stupid and can't read, the IBJ article makes clear the abatement agreement is a done deal. "The City plans to provide tax breaks in both deals. Rolls-Royce will get a 10-year, $1.2 million abatement to occupy the Faris campus . . . The $190 million Tibbs facility will come with a 10-year, $21 million tax abatement." If the city says it's giving them the tax abatement, it's a done deal. There is no entity to block it, Pat. When these deals are announced, they're carried out. End of story.

Downtown Indy said...

It will take an awful lot of $10 lunches to recoup those tens of millions in tax abatements.

fciha7 said...

Maybe Ballard is setting up his retirement job with RR just like Peterson did with Lilly's? They are defense contractors and he is retired USMC officer. Also, the plane was not cancelled, they were just told to stop work on the backup engine pending cost cuts. One particular variance is going strong.

Citizen Kane said...

All of these WAR contractors depend on illegal wars to continue operating; sucking money and lives out of our country and hurting its long-term viability. To even consider WAR jobs part of economic development is actually ludicrous. Building stuff they we don't need to destroy other people's lives and employing people to build things we don't need is, at a minimum, a mis-allocation of resources; at worst, it is criminal. Encouraging more of the same destroys the economy; it does not enhance it. And providing incentives to move such an industry down the street to help fund the downtown Ponzi scheme in the name of economic development just amplifies the need to have a discussion about what constitutes real economic development instead of the phony economic development touted by our thieving leaders as the real thing.