Last week, in his annual address listing the Savannah Economic Development Authority’s accomplishments, for the past year, SEDA president and CEO Trip Tollison noted that the authority returned more than a dozen parcels of land to the Chatham County tax digest at the end of 2016.
It was just one item on SEDA’s top 10 list for the year, but it clearly illustrated the authority’s assertion that tax abatements can work, not only in attracting and retaining job-creating industry but in adding value to the tax digest.
Those west Chatham parcels — most of which had been unimproved vacant land when they came off the tax rolls an average of 10 years ago — will result in nearly $3 million in additional annual property tax revenue for an increase of 1,200 percent.
“Property tax abatements are one of the best tools in SEDA’s tool kit as we work to grow jobs, but it’s also one of the most misunderstood,” Tollison said, adding that companies don’t just get tax abatements, they have to earn them.
“To qualify for a tax abatement, a project must be one that we are competing for with at least one other area,” he said. “Or it could be an existing company that wants to expand and needs some assistance to make it happen.
“The bottom line is it must be a project that will create jobs and investment in the community.”
“For projects that qualify, we can take the property they are looking at off the tax digest for a set number of years with the understanding that, first, the company must live up to what it has promised and, second, that its now-developed property will go back on the tax rolls at its full current value once the abatement period ends.
“This is something every community does and we have to do it to be competitive.”
That said, in the final analysis, Chatham County hasn’t really lost anything in most of the abatements it approves.
“Think about it,” Tollison said. “Ten years ago, these 14 properties collectively were paying less than $225,000 annually in property taxes. So we take 10 years, help the companies get established and grow without the burden of property taxes.
“Today, those companies are back on the tax digest, where their collective tax bill is now nearly $3 million on an annual basis.”
A win in the long run
For the 11 parcels that were unimproved when they left the tax digest, the results have been especially dramatic. Pre-abatement, those tracts were tax-assessed at $10.3 million and generated about $81,500 in tax revenue.
Today, those same parcels, now improved by the companies that own them, have a current total assessment of $169.5 million and generate approximately $2.5 million in taxes.
“If you look at the total taxes forfeited during the abatement period for those properties — $2.2 million — it comes to less than the collective post-abatement tax bill of $2.5 million — and that’s just for one year,” Tollison said. “Those companies are now invested here and will continue to grow, create jobs — and pay taxes.
“It’s a short-term investment for a long-term gain.”
Take Floor &Decor’s huge investment of a 2.5 million square-foot warehouse and distribution center in Bloomingdale, announced last fall.
“That was a competitive project between us and Charleston,” he said. “We came up with a tax abatement schedule they liked and won the project.”
Another good example is Gulfstream Aerospace, he said. “When Gulfstream did their expansion here, they looked at all of their other facilities, from Oklahoma to Long Beach, Calif., and they were all offering incentives.
“In order for us to be competitive on incentives, we have to offer some sort of tax abatement that allows companies to forego the full load of property taxes, while they are making substantial infrastructure and jobs investments in our community,” he said.
Gulfstream president Mark Burns agreed.
“As we were looking to expand in both 2006 and 2010, we evaluated locations outside of Savannah,” Burns said.
We twice chose to expand here, because of the tremendous support network, from the port, the rail system, the interstates and the airport to the strong economic development incentives that SEDA helps manage. Other locations had one or two of those elements, but not everything we needed to continue growing the business. In multi-site competitions, these incentives are important.”
Tollison said he’s aware that some people consider tax abatements akin to corporate giveaways.
“We’re not giving anything away,” he said, “This is an earned incentive.
“If companies do what they say they’re going to do – which they end up doing because they don’t want to lose their incentive – it benefits everyone. The companies are able to take the money they don’t have to use for property taxes and put more investment into jobs and infrastructure. For our part, we get quality companies providing good jobs and contributing to the community,” Tollison said.
Steve Green, chairman of the SEDA board of directors, said these kinds of tax abatements go to the heart of SEDA’s core mission.
“The short-term investment of abating property taxes on qualified economic development projects results in large, long-term financial gains for the community,” he said. “And the best part of this process is not about the new revenue – it’s creating the good paying jobs that come with these i nvestments.”
Pre-abatement assessment - $286,000
2016 assessment - $9.5 million
Pre-abatement taxes - $4,570
2016 taxes -$158,718
CenterPoint Garden City LLC
Pre-abatement assessment - $736,200
2016 assessment - $8.1 million
Pre-abatement taxes - $7,600
2016 taxes -$104,813
Pre-abatement assessment - $2.4 million
2016 assessment - $38.8 million
Pre-abatement taxes - $0*
2016 taxes -$517,915
* Prior to IKEA acquiring the property, it was owned by the state of Georgia.