Econ. dev. specialist discusses incentives with MV board

Mt. Vernon aldermen hear presentation on city commercial growth; Haymes proclaims Constitution Week
At the Mt. Vernon Board of Aldermen meeting on Tuesday, Aug. 27, Rob O’Brian, owner of O’Brian and Associates, delivered a presentation to the board about the basics of economic development, as well as some of the strengths and challenges Mt. Vernon has in attracting new businesses to the area. At the board meeting on Tuesday, Sept. 10, he followed up that presentation with another on some of the local incentives for economic development.
Purposes of incentives
O’Brian said the point of incentives was to persuade new businesses to come by reducing the risk they will be taking by coming into the community.
“What (the communities are) trying to do is mitigate the risk somewhat for the big investment that (the firms are) planning to make and also be able to assess use of capital wisely to get started,” he said.
In doing this, O’Brian added, the firms would create new jobs, expand the city’s tax base through capital investment and purchases, improve the quality of living in a city through creating better jobs and attracting services and housing, improve the property tax base and help stabilize the community’s population with the creation of more local jobs and greater amenities for the community residents.
Incentives come with risk
O’Brian also said that incentives came with some risks, one being the lack of transparency.
“Who’s receiving (the incentives)?” he said. “Who qualifies to receive (the incentives)? Who receives incentive support and why … did they get that?”
To combat the lack of transparency, O’Brian said, the city would need to specifically state who would qualify and how.
“Part of that … comes back to having some clear guidelines and (a clear) application process, so it’s very straightforward,” he said.
Kinds of incentives
O’Brian also spoke on three types of local incentives: Tax abatements, tax redirection and special assessments.
Tax abatements, he said, essentially frees the new businesses from paying any taxes in the community for a while.
“Basically, any new taxes that are occurring,” he said, “the company is not paying. They’re just off the table for a period of time.”
The second incentive, tax redirection, he said, basically takes the money that a new business pays in taxes and puts it towards improvements that benefit the new firm.
Finally, O’Brian covered special assessments, which he said are increased real and/or sales taxes in a specific geographic area to fund a project that improves the area.
“There’s a sub geographic area where that incentive is really the opportunity to increase incrementally the sales tax or property for a period of time to help pay for the improvements to make the project happen.”
For the rest of his presentation, O’Brian continued to cover more specific forms of local incentives. Among these was the Chapter 100 Bond, which he said is a form of tax abatement where a company transfers an asset to a government entity through a bond, and then the entity leases the asset back to the company, and the lease revenue pays the bond. During the time that the asset is owned by the entity, it is exempt from taxes. He also covered the Urban Redevelopment Corporation, which he said is a tax abatement where improvement of a blighted property is encouraged through the abatement of real property taxes.
Other incentives O’Brian covered included tax increment financing, a public financing method that is used to stimulate investment in an area in need of economic revitalization, and tax reimbursement agreements, where a government entity allocates new sales and property taxes from private investment to pay for public infrastructure. He also spoke about neighborhood improvement districts, community improvement districts, special business districts and transportation development districts.
O’Brian was scheduled to deliver one final presentation on Tuesday, Sept. 24, on guidelines for the use of incentives. The Lawrence County Record will provide further coverage on that presentation in a future issue.