Continuously serving Kosciusko County since 1854
What a nice bit of news it was this week to hear that Medtronic Sofamor Danek decided to build a new manufacturing facility in Warsaw.
The decision means there will be an additional 140 new jobs brought to town over the next four years.
The new facility will cost around $20 million and the new jobs will infuse an additional $4.273 million in payroll into the local economy.
Danek was looking at sites in other states, so the decision also means that the existing 230 jobs will stay here.
Those jobs would have been lost if Danek chose to relocate elsewhere.
When the issue of Danek's future first surfaced months ago, local officials were more than a little concerned.
In an effort to keep those jobs here, city officials put together a package of incentives.
The state of Indiana also put together a package, kicking in $1.5 million in tax credits, a $200,000 training grant and $250,000 to help the county with infrastructure improvements.
Locally, the city agreed to annex the property where the facility will be built and issue economic development bonds to fund the extension of utilities and other infrastructure improvements to the site.
Danek will be the sole buyer of those bonds. The maximum term on the bonds is 20 years.
During that time, the city will use the property taxes generated by Danek's new manufacturing facility to pay the interest and principle on the bonds.
Any property taxes currently generated by the property will continue to go into local taxing units.
Only taxes over and above that amount will be used to pay off the bonds that Danek is buying.
After the bonds mature, all of the property taxes generated by the project will be directed to the regular taxing units.
The project is expected to generate approximately $130,000 per year in property taxes.
I think this is a good deal for our town.
But not everybody does. Some people think this is some type of "corporate welfare" that is robbing the taxpayers.
I really don't believe that is the case.
Here's why.
While it is true that property taxes will be diverted to help fund infrastructure, the city and county gain much more in the long run - and in the short run.
First of all, existing jobs are kept here. And these particular jobs happen to be good-paying jobs. That means that more money is injected into the local economy.
The families of those existing 230 Danek workers will still be buying stuff at local stores.
They'll still be paying mortgages here, going out to eat here and entertaining themselves here.
Secondly, the project calls for 140 new good-paying jobs to be created. The payroll for those jobs alone is going to be around $4.2 million.
That's another $4.2 million per year injected into the local economy.
And all those existing workers and new workers will be doing something else, too.
They will be paying taxes.
The county option income tax is assessed at .06 percent. Simple mathematics tells us that the new jobs alone will generate about $25,000 a year in COIT revenue for the county.
And remember, the existing jobs stay here. That is COIT revenue that would have been lost if Danek pulled stakes and built its plant somewhere else.
That's just the short run. In the long run, eventually the bond will mature and all the property taxes generated by Danek will end up aimed at local taxing units.
I guess it is difficult for me to see any negatives in this deal.
Courting economic development is a worthwhile endeavor and our local officials have done a pretty good job of it in this Danek project.
There's something the naysayers need to understand.
Funding local government, police, fire, schools and other services takes money.
It is a zero sum game.
Property tax rates are based on assessed valuation. The higher the assessed valuation, the lower the tax rates.
Economic development generates higher assessed valuation which helps help keep property tax rates lower.
Economic development also generates jobs. The more jobs, the more taxpayers helping share the cost of local government and services.
It is a healthy win-win situation for taxpayers.
I once lived in a place where for many years economic development was not a priority.
That place had higher taxes and poorer services.
Controlled economic growth and development is a key to a healthy community.
If tax incentives are necessary to achieve that growth, so be it.
You can be sure, if we don't offer the incentives, someone else will and all the benefits of the development will end up elsewhere.
Local and state officials should be commended for their successful efforts to keep Danek in our county.
