The story is the result of the ongoing partnership between FOX59 and State Affairs Indiana. This effort is focused on the powerful Indiana Economic Development Corporation and how it operates. This project was initiated because the IEDC hands out millions to businesses but has little state government oversight.
THE CANDY STORE
It would be understandable if businesses in the state looked at the Indiana Economic Development Corporation (IEDC) as a sort of candy store. The IEDC offers a tempting array of grants, loans, and tax credits.
Just one of the IEDC offerings is the Hoosier Business Investment (HBI) tax credit program.
To qualify, a business must commit to pouring an amount of money into a new facility in Indiana or expanding an existing Hoosier business.
In HBI deals, there is a contract between the IEDC and a business. The construction of these contracts is unique. Ordinarily, most of a business’s information shared with the IEDC is exempted by law from public view. But within the agency’s own online ‘transparency portal,’ there is information that gives a view to how well a business performed in the HBI program.
DIGGING INTO THE DEALS
Making that discovery was Senior Investigative Reporter Kaitlin Lange of State Affairs Indiana. Lange spent months going through completed HBI contracts from 2012-2022.
“This isn’t contracts that are ongoing. This is stuff that should have already ended. These companies should have already met their investment goals,” said Lange.
In the 2015 HBI contract between IEDC and Roll Royce of Indianapolis, it requires the company to invest a specific amount of spending or capital improvement called the “Qualified Investment Commitment”. In an exhibit attached to the contract, that amount is listed at $170,000,000.
The IEDC portal shows Roll Royce’s “Actual Qualified Investment” at $161,410,182.50, however, roughly $8.5 million short of its specified amount. But again, according to data in the agency’s portal, the company still collected the full amount of tax credits, $15.5 million.
There are plenty of other examples.
NOT ADDING UP
In the Lawrence County town of Mitchell, Lehigh Cement (now owned by Heidelberg Materials) collected the full amount of tax credits in its 2019 HBI deal with the IEDC, $1.1 million. The contract called for the company to spend $430 million on capital improvements. The Actual Qualified Investment listed on the IEDC portal is far short of that mark at $263.6 million.
The automotive parts manufacturer FCC in Adams County had an HBI deal. The contract completed in 2015 called for FCC’s Actual Qualify Investment to be $128,591,000. The company collected all the tax credits offered — $275,000 worth — but the IEDC portal shows the actual amount of capital spending at only $29,660,369.19.
Our investigation found this discrepancy over and over again, where the actual amount of capital improvement was lower than what was called for in the HBI contracts.
“I have very little faith that those other (IEDC) programs are working at the level that they say they are”
State Rep. Gregory Porter
In 96 of the 277 HBI contracts reviewed, companies appeared to have missed their self-investment targets and got some of the tax credits. Sixty-three companies got the full amount of tax credits without any indication on the IEDC portal they had met the required capital investment amount.
So, we took a closer look at how the HBI contracts were worded.
“POORLY-DRAFTED” CONTRACTS
A pair of professors at Indiana University’s Maurer School of Law examined samples of HBI contracts. Both identified contract language that seemed to provide the IEDC flexibility on how the tax credits are awarded.
Clinical Professor Mark Need described the wording in the contracts as “poorly-drafted” and noted language provides the IEDC “sole discretion” in awarding tax credits.
Similarly, Professor Michael Mattioli found the contracts “suggested… a business could receive the… tax credit(s) even if it didn’t meet the… commitment.”
We also sought the opinion of Greg LeRoy, executive director of Good Jobs First, a national watchdog group focused on economic development programs.
“This is supposedly on its face a performance-based incentive,” LeRoy said, “but there’s squishy language in their interpreting the earning of the tax credits.”
IEDC RESPONDS
Starting in late November, multiple requests were submitted to interview Indiana Commerce Secretary David Rosenberg, who leads the IEDC. Rosenberg was not made available. We wanted Rosenberg to answer questions about how IEDC administrates its HBI contracts.
Instead, information was provided by Erin Sweitzer, deputy chief of staff and VP of external communications at IEDC.
Sweitzer said, “The IEDC does not incentivize the full amount of qualified investment just a portion of it as we evaluate the minimum amount of incentive needed to win the project while still ensuring a positive return on investment to the state.”
She added that when the IEDC determines a company has earned all the contractually agreed to HBI tax credits, it no longer requires the company to report capital investment figures which could account for the discrepancies found between the committed and actual investment figures.
For the companies who did not meet their investment goal but were given some of the tax credits in their contracts, Sweitzer said that is still a win for Indiana because, “the company grows, generating new state sales tax, payroll withholdings taxes, and assessed value at the local level.”
RUBBER STAMPS
State Representative Gregory Porter of Indianapolis was emphatic, “We’re not a rubber stamp. I’m not a rubber stamp.”
Porter is one of five voting members of the bicameral State Budget Committee. The panel votes on IEDC funding requests.
After sharing with Porter the shortcomings discovered in the HBI tax credit program, we asked how much faith he has in the rest of the business incentive goodies the IEDC hands out.
“It’s miniscule. I have very little faith that those other programs are working at the level that they say they are,” said Porter.
A bill introduced in the current session of the General Assembly would place greater oversight on the IEDC.
Legislation submitted by State Senator Greg Taylor (D – Indianapolis) would require the IEDC to disclose more information on its incentive programs, but it is unclear how the bill will fare with the GOP super-majority which has been very supportive of the IEDC.
Hours after State Affairs posted its story about the HBI tax credit program, a statement was issued by Commerce Secretary David Rosenberg. At the time, the FOX59/CBS4 story had not aired yet.
The statement is critical of the State Affairs story but does not request any changes to it. Additionally, there are no challenges to the facts in the story.
Here is that statement in its entirety:
“Despite weeks of communication and detailed explanation, this story fails to accurately convey how the HBI tool – or any economic tool for that matter – operates. HBI is typically just one incentive offered to a company committing to locate or grow in Indiana. HBI was only utilized as part of an incentive package in approximately 19% of deals in 2023.
To be clear, not a single tax credit or dollar goes to a company without the company delivering on a committed investment to earn that tax credit or dollar. Truly the definition of performance-based incentives, as we’ve said many times. The implication there is taxpayer waste is false and intentionally misleading.
Companies’ plans change regularly based on market conditions and other factors outside of the IEDC’s control. The incentives from the IEDC reflects these changes accordingly. Again, performance-based incentives.”
Commerce Secretary David Rosenberg
