Title: Tax Abatement and Other Incentives for Growth
Headings: Tax Abatement and Other Incentives for Growth
Tax Abatement and Other Incentives for Growth
Why Cities Adopt Policies
Examples of Tax Abatement

Content: These policies force cities to think about what they are willing to do to encourage private sector growth. The city’s economic development director is responsible for drafting these economic development policies. When a business is satisfied with the tax abatements allowed by policy, the economic development director and city manager make agreements that the city council will almost certainly approve. Economic development policies enable a city to set boundaries that the city council will think long and hard about before exceeding. Cities expect to break even when they grant tax abatements. The amount they forgo in tax revenue from the business and spend in added operational costs should be exceeded by the tax revenue increase caused by the business’s economic impact. Unless cities make an exception to policy, specific tax abatement amounts are granted according to a formula established in policy. A business must bring a certain number of jobs or a certain amount of property value increase to the city. The higher the job growth or property value increase, the higher the percentage of taxes that will be abated. Usually, the percentage of taxes abated decreases over time until the business begins paying the full tax bill.