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What are the values of tax incentive programs?

Johnson City Press • Dec 23, 2018 at 3:37 PM

In the competitive climate in which communities’ livelihoods depend on increasing tax revenues and maintaining job opportunities, granting financial incentives to developers and business owners has become commonplace.

Municipalities across the country bid on the potential prosperity a manufacturing expansion may bring or the sales tax revenue a new retail shopping center might generate, using tax breaks and up-front financing to sweeten the pot.

Recently, as Senior Reporter Robert Houk wrote last week, Washington County commissioners have again picked up the debate on the effectiveness of two common economic incentives programs, payment in lieu of taxes agreements (PILOTs) and tax increment financing (TIFs).

In the former, businesses are granted discounts on their property taxes over several years, and in return, are expected to bring new jobs or economic activity to offset the loss in public revenue. In TIFs, businesses within a defined geographical district targeted for development can receive grants from municipalities to help fund projects, with the idea that the increase in property values and tax collections will bring a healthy return on investment.

Economic experts say the programs are important tools to help grow business activity, and if they aren’t used locally, we may lose out on important jobs and outside investment. Critics, some of them on the County Commission, worry using public money to fund new businesses’ endeavors could hurt established businesses in the community who have already invested capital and time.

Last week, a majority of commissioners voted to delay two projects, a PILOT for a proposed development project in a vacant Gray warehouse and a TIF plan allowing the Johnson City Development Authority to buy the John Sevier Center, to allow them to more carefully study the merits of the projects.

We at the Johnson City Press have reported on the missteps the county and city have made in the past in approving similar incentives packages without enforcing their requirements, but we’ve also tallied the positive economic effects the projects they’ve incentivized have brought to the region.

Commissioner Phil Carriger said he was looking forward to “a healthy and hearty” discussion on tax incentives, and we want to give our readers a chance to join in.

What are the values of tax incentive programs? Should we continue granting them to businesses? How would you like to see their granting and administration changed to better suit our communities’ need?

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