In response to a new state law, the Mobile County Commission had a brief discussion on what role it will play in extending existing tax exemptions to corporations in the future, and though there’s still some discussion to be had, one business has already locked down a renewed tax break for the next decade.
The Alabama Reinvestment and Abatement Act was passed during this year’s regular legislative session and among other things, extended the maximum period of time businesses can avoid paying non-education ad valorem or property taxes — increasing the limit from 10 years to 20 years.
However, that additional decade of tax exemption has to be granted by the individual taxing authority on the municipal, county or state level. Further, the new law expanded “the types of business activities that qualify” for these exemptions, according the Alabama Department of Revenue.On Aug. 10, commissioners considered a resolution that would have handed over the power to extend existing tax breaks to the Industrial Development Authority of Mobile County (IDA).
County Attorney Jay Ross claimed the Mobile City Council has already assigned the task to its comparable Industrial Development Board. However, Commissioner Merceria Ludgood’s motion to give the IDA the same authority failed to garner a second and the county’s resolution failed — at least for the time being.
“The IDA is staffed by the Mobile Area Chamber of Commerce, they do this every single day and in my judgement, they have a better feel for it,” Ludgood said after her motion died. “I also didn’t want it to become political because I don’t want people feeling like they can influence the outcome of what ought to be an objective consideration. Anytime something comes to us, politics come in to play.”
Meanwhile, Ludgood’s colleagues both opposed turning the responsibility over to the IDA with Commission President Jerry Carl citing “timing” and Commissioner Connie Hudson stating that making decisions in the best interest of the county is “part of what the Commission is elected to do.”
Hudson went on to say she had previously discussed an approval process through the IDA that would be “contingent upon the Commission not having any objection,” but her proposal was not indicated in the resolution that wound up on the Commission’s Aug. 10 agenda.
“I’m just leery about giving carte blanche approval to the IDA to grant 20 years’ worth of exemptions from taxes,” Hudson said. “They’ve already got 10 years, and 20 years is a long time.”
After the meeting, Ludgood stuck to her narrative, saying that having a mechanism in place for the Commission to intervene in the IDA’s expansion of those tax breaks is “not the way [she’d] want to do it.”
“Abatements are a very discrete aspect of the economic development process that I thought would be better served by the IDA,” Ludgood said. “For me, you select people who are capable of doing that, and then trust them to do the right thing.”
Despite the contention over a long-term plan for dealing with tax cuts, the Commission voted unanimously to extend an extension to APM Terminals LLC to the tune of around $1.9 million over the next 10 years. Over the 20-year life of the cut, the county will have forgone $3.8 million of ad valorem tax revenue based on current property tax rates.In addition to those tax breaks, APM Terminals has also received a 10-year ad valorem tax break from the city of Mobile valued at $665,336 and a similar abatement from the state worth approximately $332,668, according to a cost-benefit analysis by the Chamber of Commerce.
That same document also shows a $366,440 10-year sales tax exemption from the county with similar breaks from the city of Mobile and the state valued at $951,540 and $665,160 respectively.
As for the ad valorem taxes, it’s unknown if the state will grant an extension of its current abatement and as of now, a member of Mayor Sandy Stimpson’s administration says Mobile has “not been approached by APM Terminals to extend [its] tax breaks.”
Mobile County’s extension comes on the heels of some criticism of Alabama’s “aggressive” use of tax incentives — a practice that was somewhat scrutinized in a recent study published by the Manuel H. Johnson Center for Political Economy at Troy University.
That study, published in April, focused on several high-profile industrial developments that all came about through tax incentives on the state, county and local levels. One of those included Mobile County and the state of Alabama’s 2007 agreement with ThyssenKrupp that ultimately enticed the steel producer to build a $5 billion facility in Calvert.
While the study suggests ThyssenKrupp helped keep Mobile County’s percentage of manufacturing jobs at twice the national average during “The Great Recession,” it also said the tax incentives cost far more than ThyssenKrupp generated.
“At the current 1,800 workers, the incentive package breaks down to roughly $555,555 per directly created job,” wrote the study’s author, Dr. George R. Crowley. “At full capacity of 2,700 employees, that number falls, but remains high at $370,000 per job.”
However, those figures are based on Crowley’s estimation of the total tax incentive package extended to ThyssenKrupp by Mobile County, the state and a consortium of local municipalities. Crowley wrote that the entire package was likely worth somewhere around $800 million — a figure that doesn’t include the state’s lucrative income tax capital credit.
Legislators have already begun addressing the issue of corporate incentives by including some required provisions in the Alabama Reinvestment and Abatement Act, including benchmarks businesses must meet in order to continue receiving certain tax exemptions, but the issue is not expected to be addressed during ongoing special budget negotiations.