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Proposed CHS plant tax incentives in negotiations

The combination of a high valuation and a long construction period has made determining the value of tax incentives for the proposed CHS nitrogen plant in Spiritwood (N.D.) Township difficult, according to Casey Bradley, auditor and chief operati...

The combination of a high valuation and a long construction period has made determining the value of tax incentives for the proposed CHS nitrogen plant in Spiritwood (N.D.) Township difficult, according to Casey Bradley, auditor and chief operating officer for Stutsman County.

Depending on the results of the negotiations, property tax mill rates for Stutsman County taxpayers could go down for the next three or four years, only to return to higher levels after the completion of the proposed CHS plant.

"Overall, the goal is to have a fair and equitable result," says Mark Klose, chairman of the Stutsman County Commission. "But we don't want to give away the farm."

CHS and Stutsman County have agreed to a total real estate market value for the completed project of $1.3 billion. The current total value of real estate for all property in Stutsman County is about $1.5 billion.

Bradley says a total market value for real estate of $2.8 billion is several years in the future at best. During the construction phase of the project, the property will be taxed based on its percentage of completion in February of each year. For example, if the project is 10 percent complete in February 2015, the market valuation of the property for taxation would be about $130 million.

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Construction is estimated to take about 36 months. If work begins this summer, the project could be under construction during February of 2015, 2016, 2017 and 2018. Bradley says North Dakota Century Code does not allow any tax exemption while a project is under construction. If the project is 60 percent complete in February of its last year of construction, it would be valued at $780 million or 60 percent of the $1.3 billion final total valuation and would make up about one-third of the tax base of Stutsman County.

That would result in a 15 to 20 percent mill rate reduction to the county rate, Bradley says. The Jamestown Rural Fire District, Barnes County North School District and Spiritwood Township would see greater decreases in mill rates and taxes.

An increase

Property tax mill rates are determined by dividing the approved budget of the township, school district, fire district or county into the tax base for that district. The larger the tax base, the lower the mill rate, Bradley says.

"The concern would be that a 50 percent or 60 percent (completion) in February 2017 would result in a significant tax reduction," Bradley says. "If they were given a larger tax exemption (upon the start of operation) we could see value come off the books."

This would result in an increase of tax mill rates for Stutsman County taxpayers, he says.

"It is too early to say what the goal is," says David Schwartz, Stutsman County commissioner, referring to a tax incentive offer amount. "But once the plant is up and running, we don't want the value to decrease."

Bradley says CHS has indicated it will seek property tax exemptions. It has retained Harvest Group LLC to negotiate the amount of exemption. Calls to Harvest Group for comments were not returned.

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"They'll look to get by as cheap as possible, and we'll try to negotiate something fair," Schwartz says. "We want to make sure there is enough revenue to cover additional costs incurred. It is a little early to judge what the goals should be."

Stutsman County has formed a negotiating committee to meet with CHS representatives on tax incentives. If CHS, which is expected to make an announcement concerning the project in the second quarter of 2014, plans to start construction this year, negotiations will need to be concluded quickly.

"According to state law, any tax exemption must be approved prior to the start of construction," Bradley says.

No meetings of the negotiating committee have been scheduled pending communication with CHS or its representatives.

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