Tech parks say they need more tax revenue to keep expanding

When lawmakers created a certified technology park program in 2002, they were aiming to attract technology-based startups and high-wage jobs to Indiana, while fostering innovation through partnerships among companies and researchers.

And to encourage investment at the sites—for things like infrastructure as well as shared labs and co-working spaces—the law allowed the parks to keep up to $5 million in tax revenue over their lifetimes that would have otherwise gone to state and local governments.

But as the program is maturing, 17 of the state’s 23 tech parks have either hit or about to hit that $5 million cap—and the people who run the sites say that puts all their progress at risk.

“We have to maintain our momentum,” said Ted Baker, the executive director of the Innovation Connector, a tech incubator in Ontario Place Certified Technology Park in Muncie.

That’s why the Indiana Technology & Innovation Association has put expanding revenue for tech parks on its 2020 agenda. It’s one of nine priorities the association outlined this week at a reception with tech leaders and legislators at Salesforce Tower.

“Indiana’s technology industry is experiencing tremendous growth,” said the association’s board chairman, David Becker, who is also president and CEO of First Internet Bank. “To continue this momentum, Indiana must embrace and position itself as a leader in the technology and innovation economy.”

The group developed its initiatives after months of work by committees and broke the list into three categories: capital, place and talent.

Some of the initiatives are aimed at lawmakers—like the proposal to boost the tax revenue diverted to tech parks—while others don’t need legislation, such as urging Gov. Eric Holcomb’s administration to negotiate more non-stop domestic and international flights in and out of Indiana.

The tech park proposal falls under the category of place.

That effort actually started several years ago, as the first parks started reaching the $5 million cap. The administrators of the sites proposed that lawmakers let them keep up to $500,000 in tax revenue per year—money that, again, would otherwise go to the state and local governments.

Baker said that would allow the parks to continue building and updating infrastructure as well as administer incubators and co-working spaces where many new businesses get their starts.

“The $5 million helped get the parks established,” Baker said. “The $500,000 keeps them moving into the future. It’s propelling those tech parks that are in existence.”

Ontario Place, for example, is home to more than 40 companies that employ more than 900 people, who earn an average of $68,000. Most of the companies, though, are small, Baker said, and need the services the park provides.

But tech folks have struggled to persuade lawmakers of that need.

After setting the proposal aside for two sessions, lawmakers this year agreed to give parks that have hit their caps up to $100,000 in annual tax revenue. But lawmakers also changed the calculation that determines what revenue the parks are eligible to collect, a move that significantly reduced the amount of money that could be available.

Here’s how: The 2002 law set a base year for determining the revenue available for parks—with the goal of ensuring that only the taxes generated by new investment and activity could be captured.

For example, say a community created a tech park in an area where a company or companies already existed. Whatever tax revenue was already being generated within the park’s boundaries would continue to flow to state and local government coffers. That amount became the baseline.

In the following years, the parks were allowed to collect any additional revenue over the baseline—taxes created as new companies moved into the park or existing companies expanded and hired new employees—up to the $5 million cap.

But this year, when lawmakers expanded the amount available to the tech parks by $100,000 per year, they set a new baseline. The results is that the parks can only capture the taxes paid on growth that occurs after they hit the $5 million cap.

The change allowed the state and local governments to begin collecting revenue that had been diverted for years to the tech parks.

But Baker said it’s just not enough revenue to maintain the work the parks and the incubators are doing.

So in 2020, the association will ask lawmakers to reset the baseline to the original amount—and let tech parks collect up to $500,000 annually.

“We believe that this would very beneficial to many, many communities,” Baker said.

But it may also be a tough sell in a non-budget year. Lawmakers approve the state’s two-year budget in what they call long sessions, which occur in odd-numbered years. In even-numbered years, like 2020, they meet for less time and shy away from legislation that spends money or reduces tax revenue.

That’s why most of the proposals on the tech association’s agenda for 2020 would not require new spending. The list does also include initiatives the group wants to pursue in 2021.

“We were trying to narrow in on what we can accomplish in this legislative session but still be planning ahead,” said Jennifer Hallowell, the association’s manager. “We want to build toward the budget session in 2021.”

Among the other proposals on the 2020 list:

– Require state entities that invest in Indiana business—such as Elevate Ventures, which administers grants and programs for the Indiana Economic Development Corp.—annually report the amount of money they have invested in companies owned by women, minorities and veterans.

– Add vendors of smart-technology products to the state’s list of contracted vendors to help local governments access the equipment more easily and affordably.

– Encourage the state to develop cybersecurity guidelines and best practices to serve as a resource for local governments and help them access vetted cybersecurity products and providers.

– Expand and update the state’s Next Level Jobs program—which provides training assistance for in-demand jobs—to include more technology occupations and certifications.

– Allow companies that receive skills and training grants from the IEDC to use a portion of the money to pay relocation expenses for highly talented workers.