TIPTON — Members of the Tipton County Economic Development Corp. learned Thursday that no matter what comes of the lawsuit Chrysler filed this week against Getrag, the county is covered.
Before the lawsuit was filed, TCEDC was slated to hear from Gary Malone of Umbaugh & Associates, who set up the county’s Tax Increment Financing District on land where the Getrag transmission is being built.
In creating a TIF district, cities or counties identify a project for a specific geographical area, he told the board. Any new property taxes captured within that area are then allocated for use in improvements to the property.
Umbaugh & Associates is involved in nearly 300 TIF districts statewide, Malone said.
“There’s nothing much different in this project than a lot of the projects we’re working on throughout the state,” he said.
Two sets of bonds, totaling $14.1 million, were issued by Tipton County.
Series A bonds, worth $11 million, were sold to Chrysler and Getrag, which will cover the purchase of the land and improvements to Chrysler and Getrag property.
Harris Bank purchased the $3.1 million of Series B bonds, which will be used to pay for upgrades to services that benefit others, such as water and wastewater improvements in the area.
The first bonds to be paid off, however, will be those purchased by Harris, Malone said. Harris received a pledge from the county to pay those bonds off, he said, otherwise neither Harris, nor any other potential buyer, would have purchased them.
“The first dollars generated will go to pay the county’s obligation, not Chrysler or Getrag,” he said. “We were able to mitigate the risk to the county by making sure its bonds were paid first.”
Harris will be paid 5 percent interest while the interest rate of 4.75 percent was negotiated for the bonds sold to Chrysler and Getrag.
The two companies have a good reason to make sure the Tipton plant goes into operation.
“If taxes aren’t paid on that land, then their bonds won’t be paid,” Malone explained. “So it’s important that they be there because the taxes are the only way they’re going to get paid for those bonds.”
By Indiana law, TIF districts may only be in effect for 25 years, but Malone believes it will only take 12 years, until 2019, to pay off the bonds that have been issued.
Getrag will also receive a tax abatement for the first five years of the bond issue with another five years tacked onto the final years. The tax abatement allows Getrag to pay a reduced amount of taxes on real and personal (equipment) property.
Malone also noted that Getrag must be in business to receive the entire abatement. “That’s another incentive for it to remain and keep the plant operating.”
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Tipton’s bonds for Getrag covered
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