What's the bottom line?
Commissioners approving tax breaks, but how much money is at stake?
At a time when Flathead County is scrounging for every dime it can get, the county commissioners have approved multiple tax breaks for local businesses in recent years, apparently without questioning how much revenue is involved or how it affects other taxpayers.
Under the county's new and expanding industry program, nine tax breaks have been approved since the beginning of 2002, including two so far this year. A public hearing is scheduled Monday morning on two more applications.
Five other smaller tax breaks were approved during that time under a related building remodeling program, including two in February.
The new and expanding industry program has been in existence for more than 20 years, although it hasn't seen much use until the last few years. It's intended to encourage economic development by reducing the amount of taxes that manufacturing firms pay on new investments.
Monday's hearing, for example, deals with two recent improvements at Plum Creek Timber Co.'s medium-density fiberboard plant in Columbia Falls.
One project involved the construction of a 600,000-gallon catch basin to recycle wastewater and eliminate groundwater discharges. The second involved construction of a 42,000-square-foot warehouse.
The combined cost of the two jobs was about $2.94 million.
If Plum Creek's applications are approved, the taxable value of these improvements would be cut in half for five years. The value would then gradually increase for another four years, until the full taxable value was reached in the 10th year.
(The taxable value is what the property tax mills are levied against. Consequently, lower taxable values mean lower property taxes.)
Similarly, the building remodeling program offers a five-year tax break on residential or commercial remodeling projects, subject to certain criteria.
The 14 tax breaks approved under these two programs since January 2002 represent a combined investment of about $80 million, most of which ($65 million) was for Plum Creek's new plant.
How much tax revenue the county, cities and local school districts lost to these requests isn't clear, though. The commissioners' files on the applications don't provide those figures; calls to the county treasurer's office and the Department of Revenue's Kalispell office also failed to elicit the information.
Commissioner Joe Brenneman said this question didn't come up for the four tax break requests approved since he took office in January.
Commissioner Bob Watne, who has voted for several such proposals during his tenure, did not return phone calls seeking comment.
However, based on figures from the Department of Revenue in Helena, it's estimated that the tax breaks cost Flathead County about $110,000 per year. Local school districts probably give up a little more than that.
Plum Creek, for example, is the most frequent applicant under the new and expanding industry program, accounting for about half the requests and 90 percent of the total investment. Its taxable values have been cut by an average of $832,000 per year for the last three years, according to state records, which would reduce its annual county property tax payments by about $100,000.
Within the last 12 months, tax breaks also have been approved for Stoltze Lumber Co., Resource Label Group and Merlin Data Publishing Corp. for investments totaling about $8.4 million.
Given the absence of specific information regarding the lost revenue associated with these tax breaks, or the number of jobs created or retained through these investments, it's difficult to determine the benefit for taxpayers in general.
"The basic assumption is that, by having this tax break, we're going to increase taxable values in the long run," Deputy County Attorney Jonathan Smith said. "If it truly is an incentive to new investment, then that [assumption] is true. But if they're going to make these investments anyway … "
Mike Nicosia, superintendent of School District No. 6 in Columbia Falls, said taxable values haven't risen substantially, despite all the growth that's occurring in the valley, in part because of state and local tax breaks for larger corporations.
"It takes a lot of new houses to equal one of these tax breaks," Nicosia said. "That's part of the reason we filed the school funding lawsuit. The Legislature talks about giving tax breaks to promote job creation, but look at the company work forces - they haven't changed much. Is this about creating jobs, or is it just passing the burden on to other taxpayers?"
Dennis Robinson, Plum Creek's general manager for panel products, could not be reached for comment.
Plum Creek is one of the largest employers in Flathead County. It's also the largest taxpayer - even after the tax breaks - by a wide margin. According to the county treasurer's office, it paid almost $2.2 million in local property taxes in 2004, or about 40 percent more than the second-largest taxpayer.
The investments that qualify for tax breaks have also helped Plum Creek, Stoltze Lumber and other companies remain competitive.
"We didn't increase the number of people working here, but we hired local construction people and we improved the efficiency of our plant," said Ron Buentemeier, general manager of Stoltze Lumber. "We're able to retain people, versus laying them off."
Stoltze first applied for a new and expanding industry tax break last spring. It has had two requests approved, including one in February for a $3.7 million investment in an optimized infeed system that allows the mill to use smaller logs.
"This isn't the old crescent-wrench repair job any more," Buentemeier said. "It's computerized equipment that requires people with higher skills and training. We're investing in good, long-term jobs for our community. I think that's important."
. . . .
The commissioners will hold a public hearing on Plum Creek's most recent tax break applications at 9:30 a.m. on Monday, in their hearing room at 800 S. Main St. in Kalispell.
Reporter Bill Spence may be reached at 758-4459 or by e-mail at bspence@dailyinterlake.com