Commission OKs tax abatement for ethanol plant

Commission OKs tax abatement for ethanol plant

By: John Brannon Messenger Staff Reporter

By JOHN BRANNON
Messenger Staff Reporter
Vox populi — the voice of the people — expressed itself through elected representatives Monday about a tax abatement for the new $160 million ethanol plant under construction near Obion.
And the people are divided.
By a vote of 12-6-2, the Obion County Commission approved a tax abatement plan offered by Obion County Mayor Benny McGuire.
The commission met at 9 a.m. Monday in the Circuit Court courtroom at the Obion County Courthouse. Commission chairman Ralph Puckett presided. Nineteen of the 21 commissioners from throughout the county attended.
A tax abatement for the EGP plant was the primary item on the commission’s business agenda.
Under McGuire’s plan, Etha-nol Grain Processors, as the new plant is known, will pay $50,000 a year in taxes the first five years it is in operation. It is anticipated the plan will go into effect July 1 when fiscal year 2008-09 begins.
The approval means EGP will pay only $50,000 a year for five years instead of a projected $232,000 a year in taxes. Conversely, were the plant not there, the rural acreage would generate only $2,400 in property taxes a year.
The plant, which promoters say will produce 100 million gallons of ethanol a year and other agribusiness products, is being constructed on row crop acreage adjacent to McDonald Road about three miles from Obion.
EGP has set a target date of Oct. 9 for the plant to be operational.
After discussion and prior to the formal vote, McGuire’s plan was amended with two provisions:
• If the plant is sold or merged in the five-year period, the abatement is automatically terminated. This provision does not apply to a merger recently announced by EGP chief executive officer Jim Patterson. “This merger is just a transfer of bonds,” said county commissioner and budget committee chairman Danny Jowers.
• The abatement applies only to current assessed property. Any expansion would require additional negotiation for abatement.
The vote
The 12-6-2 vote is explained as follows:
• 12 commissioners voted yes, including William Kane, Ralph Puckett, Allen Nohsey, Tim Doyle, Danny Jowers, Richard Arnold, Norma Fowler, Dwayne Hensley, Perry Barfield, Terry Roberts, Steve Goodrich and Steve Rice.
• Six commissioners voted no, including Robert M. Barnes, Cloney Taylor, Kenneth Cheat-ham, Jerry Grady, Jimmy Seals and Trena Taylor.
• Two commissioners passed, including Paul Albright and Polk Glover. Both cited conflicts of interest. Glover said he owns stock in the plant.
Reaction
Grady said he voted no because McGuire’s plan came as a surprise to him. He said he came to the commission meeting expecting the two plans approved by the budget committee on May 5 to be presented. Instead, only McGuire’s plan was presented.
The measure approved by the budget committee on May 5 and referred to the county commission consisted of:
• Plan A — A 75 percent abatement over a 10-year period.
• Plan B — A 50 percent abatement over a 10-year period.
• Any other plan the commission may wish to consider.
Grady asserts that McGuire’s plan did not follow normal procedures, meaning it was not presented to the budget committee before being presented to the county commission.
Barnes said he voted against the McGuire plan because he favored Plan B. “The county would have got more money out of it,” he said.
Discussion
Jowers told commissioners there have been several meetings about the proposed abatement, the most recent on Thursday of last week. Jowers and McGuire met with EGP chief executive officer Jim Patterson and Bedford Dunavant, president of Union City Industrial Development Board. Dunavant has represented EGP in tax abatement negotiations with county officials.
Most new businesses need help the first five years, Jowers told commissioners. “Those are critical years. We’ve helped other businesses. We have a record of abatement. We will (do it again),” he said.
“But the question is, ‘How much an abatement to give them?’” he asked rhetorically. The McGuire plan is only for five years and it can be renegotiated when it expires. And it’s better than committing the county to a 15-year abatement plan, he added.
“I was the first one opposed to a 15-year abatement. I don’t think we need to abate anybody’s taxes for 15 years,” Jowers said. “I don’t think we need to debate whether the ethanol plant is going to survive. What we have before us today is how much help we can give these folks to start up.”
Later, he said there have been many discussions about it over a two-year period. “We had to get to the end of this road. We had to get this thing settled,” he said.
McGuire told commissioners he wants to be fair to the taxpayers and industry as well. “We want to be good neighbors with them (industry). It may encourage others to come here,” he said.
McGuire learned that Shelby County had devised a formula to be used when considering granting tax abatements. It consists of four parts — jobs, pay scale, investments and location. Per the formula, EGP would rate a 75-percent abatement over a five- or six-year period. But this is not Shelby County, he noted.
“We talk about, ‘What has Obion County done for the (ethanol plant)?’ What has the Town of Obion done for it? What has anybody done for it?” he said.
He then answered his own questions. The Town of Obion has processed several grants for the plant. Matching funds for the grants came from the plant. “The Town of Obion processed those grants and provided (office) labor to keep up with them,” he said.
Also, he added, Obion is furnishing potable — that is, clean — drinking water to the plant. And the plant pays a water bill like other customers do. If and when a new road is built to the plant, Obion will move water lines at its own expense.
Also, he added, Gibson Electric Membership Corp. is helping. GEMC purchased one acre of land near the plant on which to built a substation to furnish electricity to the plant. A substation cannot be built on private property; therefore, GEMC purchased the acreage.
And what about the county?
“We are going to do in-kind work on (McDonald Road) at a cost of $152,000. Coffey Construction tore up two miles of our road, and we had to go back and chip and seal it at a cost of $30,000,” McGuire said. “I will say this for Coffey Construction. They hauled many tons of sand and gravel to put on this road. It has the best base of any road in Obion County and they did it free of charge. We appreciate it.”
McGuire said his plan is acceptable to EGP officials, for “right now.”
“They feel the plant will make or break in five years,” he said. “It’ll either be making money or it will be shut down. And they just want help for five years.”
Published in The Messenger 5.20.08

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