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The Paris Economic Development Corporation board got a sneak preview of proposed new criteria and guidelines for granting tax abatements for projects that stimulate economic growth to the city.
PEDC Executive Director Steve Gilbert took the board through the plan, which attracts and encourages new manufacturing industry for a capital investment of at least $1 million and 10 new jobs, while getting them onto the tax roll sooner.
The new proposal grew out of a situation in June, when the Paris City Council hesitated before agreeing to join Lamar County Commissioners Court and Paris Junior College regents in giving Potters Industries 100 percent abatement of taxes for 10 years.
The incentive package influenced Potters to choose Paris over two other cities for a $17.7 million expansion at the former Flex-o-Lite plant on Northwest 19th Street.
“This has to be finalized and approved by the governing bodies – the Paris City Council, the Lamar County Commissioners Court, and Paris Junior College — but in our discussion we changed the abatement schedule and percentages, based on the amount of capital investment,” Gilbert told PEDC directors on Tuesday.
Under state law, public school districts such as the Paris Independent School District and North Lamar Independent School District are not allowed to abate taxes.
This chart provides capital investment guidelines to qualify for tax abatement and the related schedule and percentage of abatement:
At the lowest level of a six-tiered plan, for a new capital investment of $1 million to $2.5 million and at least 10 new jobs, a manufacturer would receive an abatement of 40 percent in Year 1, 20 percent in Year 2, 10 percent in Year 3 and 5 percent in Year 4.
“For each amount of investment, it goes up a little bit. From $2.5 million to $5 million, the abatement is 50 percent in Year 1, 30 percent in Year 2, 20 percent in Year 3 and 10 percent in Year 4,” Gilbert said.
“And it goes right down the list – from $5 million to $10 million, from $10 million to $25 million, from $25 million to $50 million, and from $50 million to $100 million,” he said.
“Let’s just say there’s a $100 million project, and everybody’s very excited about it, and it’s at least 10 new jobs,” Gilbert said.
“For that kind of investment, the governing bodies would award a seven-year abatement starting at 80 percent and reducing by 10 percent a year for seven years,” he said.
If a “great project” – a plant wanting to invest more than $100 million in Paris — should become available, “we will be able to negotiate above these agreed levels,” Gilbert said.
Another thing, Gilbert said, is that abatements are really an incentive for capital investment. For existing companies, there’s not a job creation criteria in the policy, he said.
“So we added a new job creation abatement schedule and percentages. We said if a company creates new jobs, they qualify for an additional 5 percent abatement, negotiated at each of the governing entities for up to seven years,” he said.
To secure this additional abatement, the final agreement between the taxing jurisdictions and the company must measure net job increases (existing jobs at the beginning, plus new jobs) for the entire term of the abatement agreement.
PEDC director David Turner asked, “If you’re talking to a prospect that wants to put in a billion-dollar plant, you would be able to say, ‘Well, let’s talk about it.’ “
“That’s right,” Gilbert said. “For example, if there were a $300 million project – and there very well could be – then it would be completely negotiable.”
“If they bring in a $100 million investment, they’re not leaving town,” Lamar County Judge Chuck Superville said.
Turner asked what industries think about the plan.
“I’ve talked with several of our industry leaders, and the fact is that abatements help GET a project in our place. You can talk about the Campbell Soup deal and the Skinner deal, and those abatements helped tip the deal in our favor. The same with the Potters deal,” Gilbert said.
Of companies already in business in Paris, Gilbert said: “I believe that most will say, tell them the rules, and they want to maximize what we can get.“
The PEDC board would be responsible for administration, review and monitoring of tax abatement agreements authorized by the governing bodies under the guidelines.
“We would verify that participants in the tax agreement are in full compliance. We look at what the agreement says the company will do, we go meet with the company, we review the agreement, we ask the company for documentation, and then we make a report to the governing bodies on an annual basis to say if the company did what they said they would do, or if they didn’t. And if they didn’t, here’s the proposed corrective action.”
Gilbert said his hope is “that we can get a consensus” among the three taxing jurisdictions – the city, the county and the college.
“Because if those governing bodies will all agree on the same policies, if you qualify, you get it. If you don’t qualify, you don’t. That takes the politics out of it.”
That lets the PEDC approach a prospect and say, “These are the requirements. If you qualify, we’ll work through the process.”
Abatement agreements on the books now, granted recently by the city, county and PJC, are mostly for 100 percent abatement for five to 10 years:
Five incentive agreements are on the books:
Six incentive agreements are pending:
Turner asked how the proposed new plan compares with other cities.
Gilbert said the PEDC staff surveyed a number of cities, not all of which publish their percentages. He shared the information on those who do.
Greenville – Revised its policy in January of 2012. “They no longer grant abatements based on a fixed number of jobs, but use abatement to incentivize additional capital investment. Its last abatement was for a minimum $1 million investment, seven years’ abatement for new facilities and five years’ abatement for expansion. Greenville doesn’t talk about the percentages, “but we know the last one they did was 60 percent abatement for six years.”
Sulphur Springs – For at least $500,000 investment and 16 new jobs, it will abate 100 percent of taxes for five years. For $5 million investment or 100 jobs, it will abate 100 percent for seven years. For $10 million or 150 jobs, it will abate 100 percent for 10 years.
Tyler – For a minimum investment of $1 million, $480,000 in payroll and 25 jobs, the average time frame for an abatement is four to five years, but up to 10 years. They don’t talk about the percentage.
Athens – Doesn’t divulge specifics.
Mount Pleasant – Doesn’t divulge specifics.
“Are we competitive,” Turner asked.
“Yes, I believe we are,” Gilbert responded.
If the revised abatement policy is approved, a proposed abatement would first go to a tax abatement committee comprised of representatives from the three participating governing bodies – the City of Paris, Lamar County and Paris Junior College – and the chief appraiser from the Lamar County Appraisal District.
The deal would then be approved by the PEDC board before going before the Paris City Council, PJC regents and Lamar County Commissioners Court.
“This puts us all on the same page – one person speaking for all,” Superville said.
Other members of the abatement review committee — City Manager John Godwin, PJC President Pam Anglin and City Attorney Kent Mcilyar – also were present.
Other members of the abatement review committee are city Finance Director Gene Anderson and Chief Appraiser Jerry Patton of the Lamar County Appraisal District.
The five PEDC board members will look through the proposal, and if it is OK with them, Gilbert will reconvene the abatement committee to finalize the policy and forward it to the City Council, Commissioners Court and PJC Board of Regents.
Once the governing bodies have given their approval, the new abatement policy would go into effect.
By Charles Richards, eParisExtra