Published Online: March 12, 1997

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Who's Paying Full Price for Schools?

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In school districts across the country, corporations are negotiating discounts or complete abatements from local property taxes. On average, local property taxes on houses, farms, and businesses make up nearly half of the budget for schools.

St. Paul, Minn.

Rep. Dennis Ozment estimates that the state reimburses school districts about $112 million annually for property taxes diverted to develop property for businesses in tax-increment finance districts. Much of the development would go on, he says, without the tax incentive.

Madison, Wis.

The Wisconsin Association of School Boards is lobbying for changes in the state's tax-increment financing program, which they say diverts some $50 million a year in property taxes that would go to public schools to business-related development projects.

Amherst, N.Y.

The Amherst Industrial Agency in upstate New York recently granted Ingram Micro, a telemarketing company, a 15-year graduated tax abatement. The development agency expects the company to pay about $2.25 million in local taxes over the abatement periodsome $900,000 of which will go to schools.

Gresham, Ore.

In Multnomah County, Ore., LSILogic, a semiconductor manufacturer, received $113 million in tax breaks over 15 years for six new plants. The total value of the plants is expected to reach $4 billion. In exchange, the company has agreed to hire local disadvantaged workers, buy goods and services locally, and pay a number of community service fees. Schools in the state are funded through an equalization plan, and critics say the costs of abated local tax dollars are paid ultimately by poorer school districts.

Cleveland, Ohio

The Cleveland Teachers Union is circulating petitions to try to change the city charter to require businesses to reimburse abated school taxes. The school system, now under state control and some $150 million in debt, loses about $10 million a year to the breaks.

Paradise Valley, Ariz.

The Japanese-owned Sumitomo Sitex computer-chip plant, new to the Phoenix area will receive an 80 percent discount on property taxes due to its designation as a foreign-trade zone. Schools will collect roughly $2.4 million annually; full school taxes would have been about $12 million a year.

Austin, Tex.

Between 1985 and 1995, tax-abatement agreements cost Texas school districts roughly $480 million in local property-tax revenue, according to the state comptroller's office.The state currently spends about $119 million each year to offset the impact of school tax abatements.

Vance, Ala.

In 1993, Alabama offered Mercedes-Benz a "job development fee" that would have routed plant workers' income taxes--a portion of which is earmarked for education--to employee training programs. The Alabama Education Association threatened to sue, and the state rescinded the offer.

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