GIVE-AND-TAKE? -or- UNFAIR ADVANTAGE?

When manufacturing companies ask Columbus for a tax break to expand buildings or buy equipment, the request is usually granted.

But it’s not as easy for retail businesses.

Columbus businessman and entrepreneur Tony Moravec, who returned the Zaharakos downtown ice cream parlor to its 1900s grandeur in 2009 with a tax abatement, also received a tax break for his second effort to turn back history on a century-old building in the city.

Moravec Realty LLC is investing an estimated $3 million project to redevelop the former city-owned Pump House into an Upland Brewing Co. restaurant.

In an unprecedented move, Moravec sought a 10-year tax abatement for the Pump House project that would require no property taxes to be paid for the entire term. That’s something the city has not granted to retail or industrial projects.

Instead, city council members approved phasing in taxes in 10 percentage point increments during a 10-year period, with full property taxes due in 2025 for the Pump House property.

That structure for a 10-year abatement, the most common approved in Columbus, passed on a 5-2 vote at Tuesday’s city council meeting with Ryan Brand and Frank Miller in opposition.

Council members considered the idea of granting a three-year abatement, but council member Frank Jerome pointed out that since the building has not been assessed or taxed as it was formerly owned by the city, limiting property taxes for three years would give little if any help to the project.

The council is not limited to a certain number of years for an abatement but in general considers the standard at 10 years with phased-in property taxes.

A second abatement for the Pump House project — sought by Bloomington-based Upland Brewing Co. on $820,000 in equipment planned for the restaurant — got no support.

Upland president Doug Dayhoff and Moravec, also a shareholder in the brewing company, remained stoic as council members debated and voted on what type of abatements, if any, to provide for the retail venture.

Moravec told the council he was thankful for any financial help provided for the redevelopment project and that plans moving forward would not change.

“We’re going to take what you give us and run like hell,” he said, drawing smiles from the council members. “Doug will be complaining all the way home.”

During the discussion, Moravec asked the council to consider providing tax abatements for property improvements to all retail establishments planning major development projects.

“Suppose you think about it,” he said. “Think about the investment people would put into their businesses,” he said. “All it would do is create jobs.”

Moravec said small businesses struggle to become established and stay in business, and the city is in a position to assist.

“Anything you can do to help small business will help the community,” he said. “Tax abatements have helped me create jobs.”

Part of bigger plan

Moravec is majority shareholder in Moravec Holdings LLC, which also owns Applied Laboratories Inc. and Blairex Laboratories Inc. Those businesses were helped financially by tax abatements, he said, and have created jobs.Blairex Laboratories’ manufacturing and distribution center, a 45,000-square foot building, was a $2 million project that received a tax abatement in 1998. That expansion added six jobs. The center is next to Applied Laboratories, a Blairex subsidiary, at 1600 W. Brian Drive. As the company was expanding then, Moravec told The Republic he had obtained help from the Columbus Enterprise Development Corp., low-interest loans and tax abatements.Moravec described the council’s most recent tax abatement decision as a small part of the overall business plan for the Pump House project.

But he said getting the abatement would “make the nut easier to crack” on the project.

Dayhoff said he didn’t know how failure to receive the abatement would affect plans for the restaurant.

“In a community when a small independent restaurant fails to succeed, it creates a headwind,” Dayhoff said.

During the meeting, council members had mentioned how several restaurants in The Commons — Scotty’s Burger Joint, Detour American Bar & Grille and Snappy Tomato — had failed after siphoning off thousands of city dollars for build-out fees and other support.

Mayor-elect Jim Lienhoop said the council has never allowed a personal property abatement for a retail operation, however, as the property can simply be removed and moved elsewhere if the venture fails.

“As for personal property, they need to make a contribution to the tax base,” Lienhoop said.

The difference in granting an abatement for the physical building project at the Pump House, Lienhoop said, is that the real estate investment would stay in the city.

Moravec’s tax abatement is only the second granted from five requests in two years from retail operators in Columbus.

Negative feedback

Council members said they had received largely negative feedback from constituents about both Pump House tax abatement requests.Leading up to the meeting, Red Lips Spatique in downtown Columbus — through social media — asked its customers to contact city council members to protest the abatement requests.The company’s social media post said: “While we welcome a new restaurant into our community, and welcome the refurbishment of the Pump House, we are strongly opposed to the city of Columbus providing financial incentives to any retail establishment as it creates unfair advantages for those receiving the benefit. When one business does not have the same expense base as others because of a selective tax break, they have an unfair advantage to other business with which they compete. These other businesses have been hiring employees, paying taxes and providing services to the Columbus community for years with no financial incentives other than their own success of their business. While we applaud the owner of the Pump House for taking on the task of restoring a beautiful landmark building in Columbus, he (Moravec) and Upland Brewery are opening a restaurant with a plan for it to be profitable and successful. There is no reason that this project should get a reduction in the cost of doing business in Columbus that other long-term businesses have no hope of receiving.”

The Indiana Secretary of State’s Office lists the owner of Red Lips Spatique as Tonya Leach of Columbus. Leach did not return a telephone call seeking comment about the post.

In addition to the council members expressing concern, one Columbus resident also objected to the abatements.

Sharon Craig told the council she opposed the 10-year tax abatement, although she said she might be OK with a three-year abatement that council members briefly considered before the vote.

“This does a disservice to other businesses,” she said. “We have a number of unique buildings whose property owners have put in a great deal of work and have not received an abatement.”

The council members questioned whether any of these property owners had ever applied for an abatement and whether these property owners were investing millions of dollars in a historical property.

The council members also pointed out that Moravec had agreed to purchase the property knowing the city is requiring the building to be restored to the secretary of the interior’s National Standards for Rehabilitation requirements and guidelines, which in some cases is far more expensive than a regular remodel. Moravec has made those requests, which have been approved by Indiana Landmarks, a statewide preservation organization.

For example, roofing materials, windows and other structural items must be accepted as historically accurate before being replaced on the Pump House as a condition of the sale to Moravec.

No other business in Columbus has been placed under those types of restrictions, the councilmen said.

City attorney Jeff Logston read a letter to council members from Mayor Kristen Brown, who did not attend the meeting, that said she felt strongly that tax abatements to local retail and restaurants generally should not be granted.

Brown opposed an abatement request — approved in October 2014 — from Kroger Co. to develop the former Dolly Madison manufacturing site along North National Road as a larger grocery, for which it is investing $20 million. Kroger is saving $618,000 in property taxes from its 10-year abatement.

However, in the statement that was read Tuesday, Brown said she felt strongly that an exception should be made for the $3 million restoration of the Pump House.

Brown wrote that the city went through an open and competitive process to sell the former utility building with the historical restrictions. While several successful and seasoned restaurant owners considered buying the property, only Moravec made an offer, she wrote.

“The unanimous sentiment from those who declined was a lack of confidence that a business could ever be profitable after making such a large investment to restore the building,” the mayor wrote.

“I know questions of fairness are being raised,” the mayor wrote. “However, this is a totally unique circumstance in our community.”

Seeking better criteria

Before the vote, Brand asked that the city consider coming up with more specific criteria about what is required for a retail development to qualify for an abatement.He suggested meeting with local business owners to get input in determining circumstances when a retail business can qualify for an abatement and why another business might not.Moravec reminded council members that if he had not bought the building, it likely would have continued to sit vacant and simply deteriorate until the city would have to tear it down.

He said he lives in Columbus, pays a lot of taxes and creates a lot of jobs.

“I benefit from being in this community,” Moravec told the council. “I’m not asking for a tax break to put money back in my pocket. If someone wants to invest $2 million or $3 million, and you will see the taxes after 10 years, it’s a positive thing for the building,” he said. “It’s not an unfair advantage. Arguing about it is not doing the community any benefit at all.”

Retail tax abatements in Columbus

City officials have in most cases reserved tax abatements for industrial expansion rather than requests from retail stores. Indiana law excludes retail trade and auto dealerships from tax-abatement eligibility unless the developments are part of an economic development target area. Columbus City Council members have approved retail abatements in two of five requests made since 2014.

  • Kroger, which invested $20 million to purchase the former Dolly Madison plant site at 3060 N. National Road to build a new Marketplace store, applied in 2014 for the Dolly Madison property to be designated an economic development target area and sought a 10-year tax abatement. The Economic Development Commission approved the 11.5-acre property near Central Avenue as an economic development target area Sept. 29, 2014, and the council confirmed the target area request and awarded the 10-year abatement Oct. 21, 2014 over the objections of Mayor Kristen Brown. She argued that the move would create an uneven playing field for businesses in Columbus.The approval allows Kroger to phase in a portion of its real property taxes over the next 10 years. The abatement will save Kroger an estimated $618,000 in real property taxes over 10 years.
  • The Eye Place and owner Dr. Melissa Almarales was denied designation as an economic development target area by the city’s Economic Development Commission in February to build a 10,000-square-foot office building at 11th and Washington streets. She plans to use the property for an optometrist office and retail and restaurant space. Community Development Director Carl Malysz said the economic development commission effectively killed the tax abatement request because commission approval was required before council consideration. Demolition work was recently completed on the site as Almarales said she would go forward with plans to build there without the tax abatement. CAN WE GET HER PLANNED INVESTMENT AMOUNT? IT’S IN THE OTHER BREAKOUTS.
  • Chevrolet of Columbus asked for a tax abatement for a $4.2 million, 21,562-square-foot dealership on about 4 acres of land on Merchants Mile, purchased for an additional $2 million. The city’s economic development commission voted 2-1 May 26 to recommend that the Columbus Crossing development site become an economic development target area. The council denied the tax abatement June 2 but agreed to work with the dealership to try to ease zoning restrictions in Columbus Crossing to help the dealership with signage.
  • Moravec Realty LLC received a 10-year tax abatement Tuesday for a $3 million renovation of The Pump House at 148 Lindsey St. in downtown Columbus. Tony Moravec paid $285,000 for the property and is renovating it into a brewhouse restaurant for Upland Brewing Co.
  • Upland Brewing Co. did not receive a requested tax abatement Tuesday on $820,000 in personal property for a brewhouse restaurant planned in the former Pump House. Columbus city councilman said they do not give personal property abatements to retail operations as the equipment can be moved out of county at any time. Upland is planning a brewhouse with seating for 250 to 500 people and intends to hire about 75 employees.

Tax abatements for industry this year

The Columbus City Council has granted tax abatements for several industrial expansions this year. Projects include:

  • Faurecia received a 10-year tax abatement in May on a new $30 million plant at the former Walesboro airport property. The company, which produces exhaust systems for automakers and is a Cummins supplier, plans to invest an additional $61 million in equipment for the new 400,000 square-foot facility. The new plant is projected to generate 131 jobs by December 2017 with $55,000 average salaries. The Indiana Economic Development Corp. offered Faurecia up to $1.5 million in conditional tax credits based on the job creation plans. Also, the development corporation will provide the city of Columbus with up to $250,000 in infrastructure assistance from the state’s Industrial Development Grant Fund.
  • Lindal North America Inc. received a 10-year tax abatement in May for $3.25 million in equipment to help launch several new actuator products, which are used in spray product containers. The company has three buildings, two at 4775 and 4615 Progress Drive and another in Hope, and hopes to increase its employee count from 68 to 150.
  • Rightway Fasteners, 7945 International Drive, received a 10-year tax abatement in May to expand its building from 35,000 to 84,400 square feet. The company, which produces fasteners for the automotive industry, expected to hire 10 employees.
  • Toyota Industrial Equipment Manufacturing received a 10-year tax abatement in August after announcing it planned to build a $16 million, 50,600-square-foot addition to its plant on Inwood Drive in Woodside Industrial Park. The company is also renovating 13,000-square feet of existing space. The construction and renovation includes a two-story office building, a new cafeteria, new storm shelter, locker room and more space for the company’s on-site medical center. A minimum of seven additional design engineers, with average salaries of $75,000, will be added to the payroll. The company builds three- and four-wheel forklifts and other equipment.
  • Japan-based Daiei Giken Kogyo Co. received a 10-year tax abatement in November for $3 million in new manufacturing equipment it plans to install at 810 Depot St. and 3620 Commerce Drive. The company plans to use the buildings as its new U.S. production site. The company, a specialty producer of industrial components who is a supplier to Toyota Industrial Equipment Manufacturing, plans to hire five employees initially and five more by the end of 2017. The Indiana Economic Development Corp. offered Daiei up to $50,000 in conditional tax credits based on the company’s job creation plans.

How much a $1 million tax abatement saves

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Julie McClure is assistant managing editor of The Republic. She can be reached at jmcclure@therepublic.com or (812) 379-5631.