STARKVILLE — Aldermen on Tuesday adopted a tax abatement ordinance that gives the board power to determine what businesses receive them “on a case-by-case basis” without a clear policy on how those abatements will be granted.
The ordinance requires a business to invest a minimum of 50 percent of its current appraised value or $500,000, whichever is greater, for developing or redeveloping a structure to be considered for a tax abatement. The building must be located in the “central business district” or “historic preservation district,” which are both defined by city code.
Approved projects, once the ordinance takes hold May 18, will see a reduction in the property owner’s ad valorem tax bill.
As the ordinance is written, aldermen will determine the granting, time period and percentage of the abatement case-by-case, using their best judgment on whether a project warrants a tax abatement.
The measure passed 6-1 with Ward 5 Alderman Hamp Beatty opposed. He cited the lack of policies governing the decision-making for the abatements as concerning.
“Wouldn’t we need to standardize this?” Beatty asked. “… Right now, we don’t have a policy. We don’t know how to do this.”
Ward 2 Alderman Sistrunk, who has been championing the ordinance, said they “don’t have a policy” standardizing how the board will make decisions because they “don’t have an ordinance.” She encouraged the adoption of the ordinance and the development of policies helping board decision making in the future.
“I think you would need to make a reasoned argument for anything that is sort of out of the norm,” Sistrunk said. “Which is why, I think, at some point, we need to develop a policy.”
Sistrunk did acknowledge the abatement is intentionally written broadly when it comes to the locations of the businesses that could benefit.
“We have places all over town that could benefit from redevelopment or development,” Sistrunk said. “By making it as broad as possible, you just put this on the table as a tool throughout the city and not in one specific area.”
Ward 4 Alderman Mike Brooks said the ordinance should remain “as broad as we can make it,” to help with developing multiple areas in the city, including Highway 12.
But Beatty was still concerned about budgeting in the future and the city giving up potential revenue streams too easily and with too little standardization.
“Across the board, we keep chipping away at our revenue sources,” Beatty said. “… When it comes to budget time, we’re going to be looking at tax increases and cutting the budget here … and doing all kinds of creative things trying to balance a $25 or $26 million general fund budget.”
Sistrunk said the loss of ad valorem taxes will be small, compared to the amount of sales tax and jobs the tax abatement could help to attract to Starkville. As an example, she said a $1 million investment would lead to roughly $2,375 in ad valorem taxes a year at the current tax rate.
She also emphasized that the board does not have to grant an abatement to anyone, even if they apply and meet the minimum investment requirement. As the ordinance is written, the board can take into consideration the use of the structure, the location of the improvement, the potential for other tax revenue, the need for economic development and more.
“The ordinance does not guarantee any level of abatement,” Sistrunk said. “That is going to be the decision of the board.”
Sistrunk also announced revisions that have been made to the ordinance since the first public hearing. Language was added to the ordinance stating that a tax abatement will end if ownership of the property changes. The ordinance had also been adjusted so at least 15 percent of the investment will have to be spent on “public facing improvements,” rather than 20 percent.
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