The Benefits of Abatements

Tax abatements are a tool used by many communities in Ohio and neighboring states to attract new and expanding businesses to their community. The City of Mason has designated specific parts of the city as Community Reinvestment Areas and sometimes grants a temporary property tax abatement to a company that locates in one of these areas.

The City of Mason benefits from tax abatements because the abatements:

• provide the ability to compete with other communities for top-quality businesses
• increase tax revenue from new business and employee income taxes
• reduce dependence on residents to cover the costs of city services
• promote investment in the long-term stability of the community
• create future increases in property tax revenues once the abatement terms expire.

Schools benefit from tax abatements because the abatements:

• provide a revenue stream from the "make-whole"� payments that would not be there if the business investment did not occur
• provide a source of money for the maintenance of school facilities
• reduce the need to go to voters for a permanent improvement levy paid through property taxes
• promote the long-term stability of the community by attracting quality businesses that are expected to have a long-standing presence in the city and contribute to the city's future property tax base
• create future increases in property tax revenues once the abatement terms expire.

City residents benefit from tax abatements by:

• increased business revenues to the city
• not having to pay the full cost of city services they receive
• having a wide variety of employment opportunities close to home
• assurance of the long-term stability of the community.

Using abatements as a recruitment tool for bringing businesses to the city and school district has several advantages:

• the land is not developed as residential, which would add new students and more school operating expenses
• income for the school district increases through direct payments from the abated companies
• the district has not had to ask for a permanent improvement levy to fund building and facility maintenance
• the district receives more revenue than if the land had remained vacant
• residential taxes do not have to rise as the result of abatements because the businesses still pay their share of the tax revenues through unabated property taxes and direct payments to the schools.

$19.3 Million for the Community

Tax abatements are used to recruit quality companies in the city's targeted market sectors of corporate office, hi-tech, industrial, and manufacturing businesses. These types of companies typically bring the most dollars to the community. In the last 10 years, tax abatements began for 30 companies that brought jobs and investment to the city's Community Reinvestment Areas. The abated taxes for this period were $7 million, but the return to the community was $19.3 million, including over $1.6 million in direct payments to the schools and over $7.5 million in personal property taxes.

To raise this amount through property taxes over this same 10-year period, voters in 1996 would have had to approve a city tax levy of approximately 38 mills plus a school levy of about 16 mills. For Mason residents, this is the equivalent of $191 annually on a $100,000 home in 1996 ($61 annually by 2005 due to the increased valuation of the district).

It can be concluded that while the City of Mason and the schools have benefited from tax abatements, residents benefit the most through lower tax rates, improved city services, and quality education.

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Posted: August 1, 2006