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09-17-2007: Lewisville Property
Tax Abatements are not always good.
Tonight I spoke to the City
council about not giving an tax abatement to what I understood to be an
office complex and warehouse type business. The details from
the presentation were a little sketchy to me. The presentation
was all about how nice it would be and what the plans were. I
think I heard that the warehouse would employ about 20 people and the
Office complex would hold up to 200 people in offices.
I stated that I am
against the 75% off the property tax abatements of 0.46% that are being
considered. I think Lewisville has a lot of good things going for
it, such as a major highway running through the city, and large
companies should invest their money in Lewisville. I think that the
City could use these funds to cover items in the budget that
these developments will generate, such as police protection, water
service, new roads, etc... If the City needs the money then
the City Council will raise property taxes to provide for these
things. I think that it is wrong that citizens have to pay property
taxes and these big companies come here and get a tax abatement.
I think that businesses will come to Lewisville and invest their
money to be here. I feel that big companies can afford the
money that it takes to pay Lewisville taxes. The Council
should not give this money away.
I was told that the remarks from the Council seemed kind of rough
on me. I did not think so. We just disagreed strongly.
The council members stated that I was for abatements last week.
During the meeting, I did not remember being for an abatement for
real property (appraised land value). What I
actually supported was not taxing a company for personal property
(what it has in
storage). To me these are two entirely different things and
that is why I did not relate the two. To me that's like
taxing what is in your pockets. It does not matter if they
store cow manure or gold bars. Yes, I do not think we need to
tax the worth of what is stored in the buildings. What is the
difference if a company had ten thousand dollars is bills or ten
thousand dollars of widgets on the floor of the warehouse? It
is still their money no matter what form it is in.
They also said that any tax
break is good for the economy. I do not think so. This
real property tax break is for the owners of the building who are going to add
that to the money they do not have to invest in Lewisville.
Tax breaks might work if you give them to the people who tend to spend
their money.
During the meeting,
All the Council stated again that I was for abatements. They
wanted to look at last weeks video. They reviewed it at the
end of the meeting and I was told that it was mistake. I
wonder if that means on my part or theirs - they did not elaborate?
I tried to explain that what was in storage is not the same as land
value but I do not think they wanted to discuss it. I did feel like they wanted
to drop it.
09-18-2007: After the
meeting...I wrote to all the
members and mentioned why I thought these particular abatements were
not good and I gave the following figures. (note: two weeks
later and I have not received a
response to my information.) I also stated in my email that some
abatements for businesses that are going to return the money in
sales taxes are OK. The Mall is a great example where every
dollar sold gives the city 1% (does not include 4B or DCTA) of sales tax income. To give an
abatement to the Mall project is something that I agree with - if
they ask for it and it is a deal breaker only. I am still
reluctant to give the money away. Another example might be to
get an existing property redeveloped. Again, not to just give
it away.
In my quick figures
below,
I intentionally underestimated the value of the property as 10
Million which is about half of what it is expected to be worth.
Therefore the amount of lost revenue is about double what I used in
this example.
Property value in this Example = 10,000,000.00
City Property Tax Rate = 0.45679%
Abatement Discount is 75% of the property
tax rate
75% of City Property Tax (Abatement Discount)
= 0.34259%
Therefore, the Estimated Tax Discount in dollars is $34,259.25
The City gets
1.00% of the Sales Tax (this does not include the 0.5% the City gets
for 4B usage which is for parks and new buildings, etc...) Yes, the City
gets 1.5% of sales tax but the funs for 4B are supposed to be different.
We will use the 1.0% in this example.
Therefore, the Amount people would have to spend on taxable items
in order for the City to reclaim discount is $3,425,925.00 per year.
This means that each of the estimated 200 employees will have to spend an
average of
$17,129.63 per year on taxable sales items in Lewisville. The
abatement was for 5 years and you can add that up. Keep in mind that at 20
Million value, that this number doubles to each employee spending more than $34K
each year on taxable items.
To me, this is the best case scenario if these were
actually 200 new people to Lewisville. Since I think people spend money
where they live, the number of people actually shopping in Lewisville will be
much less especially if they do not live here. If these people already
live in Lewisville, then these are not new people to spend new money.
These people would have already been here. The more that you consider actual
possibilities, it looks worse and worse.
(update 10-01-2007: I still have not heard anything back from the City
Council on this. It seems to me that they do not want to address my
concerns.)
Another issue that comes to mind is that these projects may
also depress the local building needs. Will we just have more empty office
space and warehouses? It is hard to say. They did say that there are
not any tenants lined up at this time.
09-20-2007: Mayor Gene Carey is quoted in the paper and he implies
that I stated the City was mismanaged. I did not. What I
was saying is that I do
not think that the City Council has to give the abatements if
they are not going to get that money back. Because of the
location and assets of Lewisville, I think the businesses will come
anyway. I admit that he may have been misquoted but I have not
heard anything to the contrary.
10-01-2007: I spoke to the
City Council meeting today for the record. I stated that I
read the Mayor's remark and I suggested that he may have been
misquoted. I stated directly to the City Manager that I
thought he was doing a great job managing the City. I also
stated that after the meeting on 09-17-2007 that it was mentioned
that I was supporting property tax abatements. I stated that
the land and structures are what I consider for property taxes, not
the items that are stored in the building - which can leave at
anytime. It is like paying more because you wear a nicer watch
on your wrist. I stated that I consider these subjects as
different. I also asked if they got my email and
figures. I got a few nods but no comments to my figures.
They seem to want to drop the subject.
03-15-2010:
In 2007, I learned that retail and
commercial locations (store fronts, warehouses, office buildings,
etc...) had to pay personal property taxes. I never thought
that this would ever apply to a person's private residence.
Well, now I know - It does.
I would
venture a guess that most people who have a small business and work
from their home do not know this either, so let me tell you what I
learned this week. A person will have to pay personal property taxes
on their home office or any personal property if they use that
personal property to make money. Period. These items can include but
not limited to: Office furniture (desk, table, lamp, etc…), office
equipment (phone, fax, printer, PC, calculator, etc...), tools of
your trade (blow torches, hammers, ladders, etc...), and inventory.
Here are just a few areas that you might not have thought about …
Mary Kay, Avon, Handy Man stuff, Mow Lawns, Massage Therapy, a
subcontractor, bringing work home from your business or work. Yes,
work. Technically speaking you would be doing something to make a
profit.
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