The following letter was sent to Mayor Buttigieg and the Members of the South Bend Common Council on May 16, 2013:
As
you know, on April 8th the Community Forum for Economic Development,
in collaboration with AJ Wright workers and La Casa de Amistad, submitted a
proposal to use the penalty money from AJ Wright to help the displaced AJ
Wright workers. (The proposal is on this website, here)
Some questions have been raised with regard to the penalty money, in
particular:
1) Did the
money used for incentives come from a general levy on South Bend taxpayers, and
so should the penalty money be used to repay these taxpayers? and
2) As a
result of the incentives, are there outstanding debts that the City of South
Bend has on its financial records, and so should the penalty money be used to
repay these debts?
We believe the answer to both of
these questions is no (see explanation below).
Moreover, we believe that there is a strong case to be made that the
penalty money should be used to help the AJ Wright workers, for the following
reasons:
1) The
workers who lost their jobs when AJ Wright closed are still struggling.
2) The
ultimate beneficiaries of the money spent to bring AJ Wright to South Bend were
the workers who would obtain jobs, so it is still appropriate to support these
workers.
3) Money
used to help AJ Wright workers ultimately helps the entire South Bend
community, as money is pumped into the local economy.
The facts:
$10,277,529 was spent as an incentive to bring AJ Wright to town (see the
“Total” column in the attached table)
Download Table 1
The funds that financed this $10,277,529 incentive came from the
following:
A. Funds
repaid to the City of South Bend
$2,303,320 From the sale of land to AJ
Wright, including closing costs
B. Funds
from the State of Indiana
$1,050,000 Economic development
grant
C. Funds from
Redevelopment Bond – This is a TIF Revenue bond, obligated to be repaid by TIF
funds
$6,632,458 Including bond issuance costs, interest
income (earned while funds were on deposit), and miscellaneous revenue
D. Funds
from COIT (County Option Income Tax)
$291,751 Water and sewer utilities and
miscellaneous revenue
The only money that is a direct levy on South Bend taxpayers is the
$291,751 from COIT – only 2.8% of the total money spent for AJ Wright.
There is a debt that was incurred with the issuance of a bond, but since
it is a TIF Revenue Bond, the obligation for repayment of this bond is from TIF
revenues. Only if TIF revenues are
insufficient to meet the annual bond payment would it become an obligation of
the City of South Bend. And since
Controller Mark Neal’s recent report indicates that the Airport TIF (in which
the property is located) has a current cash balance of $15,918,644.23, with
incoming cash in just the month of April 2013 of $2,145,984.14, this
possibility seems highly unlikely. Indeed,
the bond payments were set up so that the cash generated from property taxes on
the AJ Wright property itself, paid into the TIF, would be sufficient to meet
the bond obligation.
Under the Development Agreement
between the City of South Bend and AJ Wright, the company is responsible for
paying to the City $460 for jobs not created. Beginning in 2011, the year
that AJ Wright left town (with funds received in 2012), and continuing through
2019, $354,660 per year is the company’s required penalty. (The company promised 857 jobs. They were given a 10% “allowance” of 86 jobs,
so they are required to pay a penalty on 771 jobs; at $460 per job, this
amounts to $354,600 per year.)
These payments have been deposited
into the City's Economic Development Income Tax (EDIT) account. EDIT now allows any use permitted a local
government under state law, i.e., its allowed uses are the same as those of the
General Fund.
So, since
there is nothing to prevent the City from doing so, it seems appropriate – and
just – to follow through on the intended objective of the AJ Wright incentive
money to benefit the AJ Wright workers.