Based on what I have generally seen, a developer eye balls a piece of property, secures the right to purchase it, then approaches the city/county with a proposition. If the developer and municipality agree on terms, the property is acquired and development starts.

In this case a company came in a while back, got permission from the county for their project, purchased the property over a year ago, and are now halfway through construction. Hundreds of millions of dollars worth.

And the county just gave them a 20 year abatement yesterday under a program designed to attract new businesses, retain existing businesses, or to provide major expansion to an existing business.

Does that seem normal? My instincts are that something isn't right because this was all done completely under the radar.

Generally such a tax abatement programs are put in place to spur development and secure investment for development that would not otherwise occur. I'd think it's not typical for such to occur halfway through a development project unless it involves a major revision/expansion from the initial project plan, or there's a financing/capital issue that may prevent the project from continuing/going forward, jeopardizing ultimate completion that would have negative effects on the community.

quote:

My instincts are that something isn't right because this was all done completely under the radar.

Your instincts are correct. Special tax rates for special people...

Special taxing districts, tax abatements, and tax credits.

The problem with all of these carve outs is that it shifts the tax burden to the little people instead of keeping taxes lower and broader.

quote:

unless it involves a major revision/expansion from the initial project plan, or there's a financing/capital issue that may prevent the project from continuing/going forward, jeopardizing ultimate completion that would have negative effects on the community.

None of those apply. Big company, plenty of money, construction continuing as normal along the original plans.

quote:

Your instincts are correct. Special tax rates for special people...

Special taxing districts, tax abatements, and tax credits.

The problem with all of these carve outs is that it shifts the tax burden to the little people instead of keeping taxes lower and broader.

This is what happened in Nashville & Williamson County. Nashville increased all other property taxes 33% to compensate.

Relatives get jobs, campaign contributions, or other "considerations" could be in the mix.

The only thing that seems strange if this is a large public company is they are unlikely to do something illegal like this. A large privately owned enterprise, see above.

Around here, those things get published in the newspaper before the local governmental authority meets to decide on them so the public can show up to the meeting.

Stuff happens midstream that changes the original plan. I don’t see why tax abatements couldn’t be granted mid-project. For example, Allegiant Airlines has been building a resort complex in my county for years now. It’s changed a number of times with the biggest being the size being scaled back. The airlines getting shutdown during COVID and all the COVID requirements during construction really screwed them. I don’t know because I don’t care, but my county could very well have made additional concessions to get the project going again rather than let it sit 30% completed for another 3 years.

It’s almost finished now and property values in the area should go up. It’ll bring jobs and tourist tax revenue with it.

I used to see this all the time when I lived in Portland. A company considering building a new facility in an area will be given huge tax breaks, relaxation of zoning requirements, and various other considerations in order to convince them to make the purchase. Then the taxpayers in the area are asked to approve new levies to pay for it all, or as Anush said, their property value assessments go way up.

Is it normal? Unfortunately, more and more so. Is it a good thing? IMO, no.

quote:

A large privately owned enterprise

That it is.

Based on a quick google search, with $3.1 billion in revenue and 4,000 employees.

quote:

Stuff happens midstream that changes the original plan

The only change is the new 80% and 75% tax abatement.

quote:

Around here, those things get published in the newspaper before the local governmental authority meets to decide on them so the public can show up to the meeting

Even if this were the case, none of the entities impacted knew about this until the very end, if at all. The fire district and ambulance district were discussing this about 48 hours prior to the vote. The law allows them to opt out of any abatements, and they indeed did.

The school board knew nothing of this. Two parties involved apparently did, but seems as if they didn't want to mention it to the board itself. Our small district will receive roughly $80,000,000 less than they would have otherwise over the next 20 years, yet will have to find the space in our already overcrowded district for the students brought in by the 1,500ish employees expected to work at the new plant.

quote:

A company considering building a new facility in an area will be given huge tax breaks, relaxation of zoning requirements, and various other considerations in order to convince them to make the purchase

That's the opposite of what happened here. The company already decided to build a new facility here, had it all rezoned, and is halfway through the construction process. And now they're being given tax breaks.



This is a summary based on a $400 million valuation (even though they're spending $800 million to build it):

perhaps they needed to get to some percentage of completion before the tax abatement deal would move forward, could it have been part of the initial agreement with a carve out date and pct work done before the government would activate the deal.

How many new students are expected and what’s the current expenditure per student?

Does the school system have the physical space to absorb the expected influx or will new buildings be required?

How much new school property tax revenue will be generated when these families build new homes?

How much new school property tax revenue will be generated from the new businesses or expansion of existing businesses required to support the influx of people?

It looks bad on the paper you showed, but maybe it’s not as bad as it seems. I’d certainly question if the people making the decisions had the authority to do so as well as question if they followed the any required procedures properly in doing so.

If your district is going to need new buildings, not being able to borrow against the $80 million in future taxes really puts a damper on that.

How sophisticated are the folks that granted the abatements? Did they think this through?

quote:

Originally posted by a1abdj:
The only change is the new 80% and 75% tax abatement.

How do you know this? Here are a few possible changes the public wouldn't see:

Gov't and builder have a handshake agreement, and then signed abatement moved at the usual speed of gov't. Builder elected to start based on handshake rather than signed agreement.

Builder has milestone funding from its finance company and their underwriters. Allowed to break ground based on handshake deal, but next milestone of funding required having the final abatement.

The builder may have $3.1 billion worth, but could be leveraged to the hilt and their financiers got nervous so kept adding stipulations that delayed the abatement being signed.

---

Ego is the anesthesia that deadens the pain of stupidity

DISCLAIMER: These are the author's own personal views and do not represent the views of the author's employer.

My guess is that in the permit documents, it was stipulated that the builder would have to apply and then the abatement would be granted in a range of not less than not more than depending on XYZ.

At today's cost of money and material inflation the faster this is done and making money the happier everyone is.

Municipalities usually only screw with little guys whose pockets are not deep enough for a protracted legal fight.

This was probably already informally approved before they broke ground, the rest was getting the formal process done which can take months or years in some places.

quote:

Here are a few possible changes the public wouldn't see: Gov't and builder have a handshake agreement

Well that would be a big problem, wouldn't it? The government isn't supposed to be engaging in behind the scenes handshake deals which avoid public scrutiny.

I can't speak on the rest.

quote:

How many new students are expected and what’s the current expenditure per student?

The first question is a good one that I also haven't seen an answer to. We currently have roughly 1,700 students enrolled in our district. As part of the abatement, they are required to have a minimum of 1,300 and change employees.

Current cost per child is roughly $12,000, with an estimated PILOT payment of $1.2 million +/-, so my math says that would educate an additional 105 students.

quote:

Does the school system have the physical space to absorb the expected influx or will new buildings be required?

We just expanded one building which remains above capacity at the elementary level, and went $15 million over budget on phase 1 of a new high school. Although we will have a little head room at the high school level once built, every building in our district is at/above capacity currently.

quote:

How much new school property tax revenue will be generated from the new businesses or expansion of existing businesses required to support the influx of people?

In a perfect world, a lot. But this is a small town and none of that is guaranteed. The small town has botched many previous projects because it still operates on the good ole boy system, and those guys aren't necessarily making the best business decisions.

In small town Iowa these private handshake deal seem to be the norm. A dentist offered to build an office with a dozen employees if he got a 20 year tax abatement. The city agreed, reasoning it would bring people to town that would pay taxes. Published city council records don't include details of deals like this.

Most small towns near Des Moines have adopted 7 year residential tax abatements to encourage builders and home buyers. This has been going on for a while with banks, builders, and real-estate agents all supporting it. This has divided cities into people with older, cheaper homes paying the maximum possible property taxes and people with new homes paying none.