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IBJ: Tech parks could capture larger share of tax dollars

March 13, 2023 10:14 AM | Anonymous member (Administrator)

INDIANAPOLIS - A bill that would divert some $6 million in state and local tax revenue annually to state-certified technology parks has passed the Senate and is headed to the House, where similar legislation died two years ago.

Senate Bill 271 could immediately help 18 of Indiana’s 22 tech parks keep more of the sales and income taxes generated by the businesses within them. The money could be used to administer or expand the parks and their infrastructure, recruit additional companies or provide services to existing businesses.

The bill, authored by Sen. Brian Buchanan, R-Lebanon, could mean an additional $400,000 annually for most of the parks, money that otherwise would be allocated to state and local government general funds. Sen. Travis Holdman, R-Markle, chair of the Senate Tax & Fiscal Policy Committee, signed on as the bill’s co-author, a move that strengthens its chance of final passage.

The Senate voted unanimously Tuesday to advance SB 271 to the House. But its prospects there are less certain.

Buchanan authored a similar bill in 2021 that would have provided tech parks with $250,000 in additional annual revenue. That bill passed the Senate but never had a hearing in a House committee.

“It boils down to continued job growth and development,” Buchanan said. “That’s the purpose of the bill.”

The state’s certified tech park program was created by a 2002 law that sought to boost economic development and job growth by focusing on jobs in industries such as microelectronics, biotechnology, engineering and laboratory testing, environmental technology, medical devices and advanced vehicle technology.

The law let cities and counties apply to the Indiana Economic Development Corp. for authority to designate an area for high-tech development. The application required cities to have at least one company committed to the tech park that planned to create a “significant number of jobs” and a comprehensive business plan or at least one other partner or program, which could include a university, military installation or facility, or an existing or planned business incubator.

The parks are allowed to raise private money and accept grants and other outside funding.

But to give the operations a boost, the law allows the parks to collect what’s called “incremental” income and sales tax revenue generated within the park’s boundaries. That essentially means state and local tax revenue that results from new development at the park—on top of the amount of tax revenue that already was generated in the designated area.

Tax-increment-financing districts, which are designated locally for development, operate in a similar way. And in fact, cities and counties can also designate the tech parks as TIF districts, allowing them to capture incremental property tax revenue, as well.

The original state law capped the total sales and income tax revenue a tech park could collect at $5 million (not including property tax revenue it might generate through a TIF district).

To date, the state has certified 26 parks statewide, though only 22 remain active. Of those, 18 have hit the $5 million cap, according to an analysis by the nonpartisan Legislative Services Agency.

So in 2020, lawmakers passed a bill allowing parks to capture up to $100,000 a year in additional state and local income tax revenue after they reached their $5 million cap.

Buchanan’s bill would raise that amount to $500,000.

The change would result in the loss of about $4.5 million in annual revenue to the state beginning in fiscal year 2024, while local governments would lose about $1.8 million per year, according to an LSA analysis. Those amounts would increase slightly in later years if all the tech parks reached their $5 million cap.

Tech community support

Supporters of the legislation say local communities directly benefit from job creation that stems from cultivating businesses in the parks.

Jennifer Hallowell, executive director of the Indiana Technology & Innovation Association, which represents tech companies and entrepreneurs in Indiana, said the parks will continue to change and grow as new thinkers enter the space.

“The idea here is not that we launched these many years ago and it’s the same firms,” Hallowell said. “We’re continuing to grow and launch new businesses; it’s an incubator of sorts.”

Ted Baker, CEO of the Muncie Innovation Center, a business incubator in the Ontario Place Tech Park, said the funding is for growth.

“Receiving this funding is not about sustainability—it’s about growing Indiana’s tech sector,” Baker said, noting that the Muncie incubator plans to expand from 16,000 square feet to 45,000 square feet.

Baker also serves as executive director of the tech park, which is in an area that was once an abandoned manufacturing facility and retail space. He said companies in the park increased their employment levels from 935 jobs in 2018 to 1,314 jobs in 2021, a 40% increase. The average wage for employees in the park is about $66,000, he said.

David Bolling is executive director of Launch Fishers, which is in the Nickel Plate District Certified Technology Park. He said the incubator and coworking space currently has 130 member companies representing nearly 600 employees.

In addition, he said, outside investors have poured $110 million in capital into Launch Fishers companies over the past eight years.

“These are important initiatives for the state to undertake to support businesses at the ground level,” Bolling said. “These are companies that are grinding it out, day in and day out.”

Kent Parisien, who serves on the board of WestGate Authority, which governs the WestGate@Crane Technology Park, said the legislation will allow the park to bolster efforts to bring high-tech businesses and jobs to Indiana.

“To date, the WestGate@Crane Technology Park has captured a total of $15.9 million in state incremental tax revenues,” Parisien said. “This has allowed the technology park to leverage additional public and private investments, bringing our total investment to $114.6 million.”

The WestGate tech park is allowed to capture more revenue than other parks because it spans three counties, which allowed it to capture $15 million total from sales and income taxes before it started collecting the supplemental tax revenue.

SB 271 also has support from the Indiana Chamber of Commerce.

Accountability added

As passed by the Senate, the bill includes an amendment authored by Sen. Eddie Melton, D-Gary, that aims to better track what’s happening in tech parks.

It requires the Indiana Economic Development Corp. to submit a report to the State Budget Committee every other year that provides details about each park. Melton said the information would help lawmakers better understand how the parks are operating.

“It would be great information for us to have,” he said. “The state is investing significant amounts of resources” in the parks.

The report must include the number of businesses in each park engaged in high-tech activity, the number of businesses that have left the park and where they moved, the number of employees at each company, the average annual wage paid to those workers, and the total capital investment by each business.•

Indiana technology speaks for itself.

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