Taking Back Tax Abatements: What the Code Says

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The Commission shall require that applicants for Economic Revitalization Area designation enter into a Memorandum of Agreement with the City following adoption of a preliminary resolution, and prior to the adoption of a final resolution. The Memorandum of Agreement shall contain the capital investment levels, job creation and/or retention levels and hourly wage rates the Applicant has committed to the City in order to receive consideration for Economic Revitalization Area designation. The Memorandum of Agreement shall also contain information relative to what the City and Applicant have agreed upon as “substantial compliance” levels for capital investment, job creation and/or retention and wage rates and/or salaries associated with the Project or Equipment.

Additionally, the Memorandum of Agreement shall indicate that the City, by and through the Commission, reserves the right to terminate an Economic Revitalization Area designation and the associated property tax abatement deductions if it determines that the Applicant has not made reasonable efforts to substantially comply with all of the commitments. If the City terminates the Economic Revitalization Area designation and associated tax abatement deductions, it may require the Applicant to repay the City all or a portion of the tax abatement savings received through the date of such termination. Additional details relative to the repayment of tax abatement savings shall be contained in the Memorandum of Agreement.

The applicant has executed a memorandum of agreement (“memorandum of agreement”) prepared by the Community and Economic Development Department. The memorandum of agreement is a legally binding agreement representing a contractual relationship between the applicant and the Council. It may become effective upon the Council granting the abatement, which includes provisions setting forth:

a. The tax abatement recipient’s agreement to fulfill the conditions upon which the tax
abatement is based (“conditions of abatement”);
b. The time within which the tax abatement recipient must comply with the conditions of abatement;

c. The tax abatement recipient’s obligation to respond to periodic surveys regarding compliance with the conditions of abatement;

d. The tax abatement recipient’s obligation to allow representatives of the Community and Economic Development Department to have access to the project premises and to perform inspections and audits as necessary to verify compliance with the conditions of abatement.
(4) Neither the applicant nor any related party of the applicant is delinquent or in default

e. The events which:
1. Shall entitle the Council to terminate the tax abatement in whole or in part; and
2. Shall cause the tax abatement recipient to be obligated to repay all or a portion of the property tax savings received.

3 COMMENTS

  1. Wondering why our city and county elected officials not going after Whirlpool Corp. to get for our Tax Abatement refunds?

    Is because we can’t get the majority of the members of the County Council to sit down as a group and talk budget matters?

    Maybe Masha Abell is out of town on another political junket?

    Could the Mayor be to busy jumping ropes?

    What can I say about City Council.

    • Actually the City was the taxing authority for the Whirlpool tax abatements. As the CCO has previously reported, there is no memorandum of understanding in place so alas the ball has been dropped.

      • I do not think it was “dropped”, but rather intentionally left out with a knowing wink and nod by both parties.

        It is sort of like the obligatory personal property phase in that a lot of local business, which included Whirlpool, enjoys.

        The phase ins occur over a 7 year period. There is something significant about that 7 year time frame. When one looks at the depreciation timetable on machinery and equipment etc., at the end of seven years it has depreciated to the lowest tax rate at which time it will continue to pay at that low rate.

        So, I do not know why, if the intent of the tax in the first place was to bring in revenue, this phase in system has become obligatory.

        It just winds up being lost tax revenue that, if local spending is not held in check, someone else has to make up. Usually someone with a lot less political clout.

        Good, bad, or indifferent, that is the way it works.

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