COBURG — One of the biggest economic development projects in Lane County in a number of years is slated for an unusual public hearing in Coburg next week, even as local officials are keeping mum about many of the project’s details.
At next Tuesday’s meeting, representatives of the company — which some sources have said is Paris-based applesauce maker Materne — are expected to disclose more information about the project.
The proposal is expected to involve capital spending of at least $25 million and likely much more by the company on an applesauce production facility that would create from 150 to 230 manufacturing jobs. The facility would go in part of the former Monaco RV factory.
The public hearing is intended to solicit community comment on the project and on the property tax waivers that the company would receive. However, the two entities holding the hearing — the Lane County Board of Commissioners and the Coburg City Council — are releasing little information about the project or the specifics of the possible tax breaks.
Under state law, local officials are legally required to hold a public hearing for the type of property tax breaks they are proposing to offer. The agreement of both the city and the county would ultimately be needed in order to finalize a tax deal.
County commissioners and Lane County spokeswoman Anne Marie Levis said Wednesday they would have no comment on the public hearing, for which Lane County and Coburg have both published brief notices. Coburg Mayor Jae Pudewell could not be reached for comment. Coburg City Administrator Petra Schuetz confirmed Wednesday that the meeting will concern the recruitment effort that is dubbed “Project Squeeze” by the state, and the tax incentives that are on the table.
Materne has been looking for a location for an applesauce factory in the Northwest for about 18 months and has already ruled out expanding in Roseburg and Forest Grove. If it comes to fruition in Coburg, the facility would mark a coup for local officials eager to recruit outside manufacturing companies to Lane County. In decades past, the county has witnessed manufacturing booms in technology products and recreational vehicles, followed by busts as most of those factories shut and laid off their workers.
Local leaders are considering a 15-year property tax break under Oregon’s Strategic Investment Program to lure the facility, according to agendas for next Tuesday’s meeting released by Lane County and Coburg. The SIP program exempts companies from a significant portion of their annual property tax bills on large capital investments. The program is reserved for “traded-sector” businesses, typically manufacturers, and is in use on 15 business sites in the state, as of 2011, including three Intel sites in Washington County and a slew of wind farms in Eastern Oregon.
The program offers big property tax savings, particularly in rural areas like Coburg. Businesses pay property taxes only on the first $25 million of property value initially, as opposed to paying taxes on the first $100 million in urban areas. The remainder of the company’s property tax bill is waived in the first year.
Every year thereafter, the taxable portion of a company’s factory grows by 3 percent. Companies are also required to pay an annual “community service fee” to local jurisdictions to offset lost property tax revenues. In rural areas, companies must pay $500,000 annually or 25 percent of tax savings, whichever is less, towards those fees.
For example, in Coburg, if a company spent $50 million to buy and equip a factory, it would pay about $350,000 in property taxes in the first year on the first $25 million worth of the factory. It would be waived from paying taxes on the remainder of the value, a savings to the company of $350,000. Also, the company would have to make a community service fee payment of about $88,000 that year. The bottom line: The company would pay a total of about $438,000 in property taxes and community service fees in the first year, as opposed to $700,000 in property taxes without the SIP incentive.
The annual tax savings would decrease after that, both because of the taxable threshold rising and because of the depreciation of the initial capital investment. Beyond that general framework, local jurisdictions can choose to add stipulations to any individual SIP deal, said Marc Zolton of Business Oregon, the state’s economic development agency.
The program resembles the benefits of enterprise zones — a more commonly used economic stimulator — although the SIP tax break is typically smaller on annual basis but lasts for many more years. A generic SIP deal also doesn’t contain specific employment or wage requirements for companies, as enterprise zones do, but they can be added to any agreement.
Another element of the SIP is that local jurisdictions can use a state-funded program known as “wage gain share” to recoup some of the property tax revenue they forgo. Under gain share, the state pays local jurisdictions 50 percent of the income taxes generated by the new jobs created by the business benefiting from the SIP.
That gain share provision, which was added to the SIP program by state lawmakers in 2007, could be revisited or tweaked soon by the Legislature, however. State lawmakers gave the program a hard look this year, because of its growing cost to the state general fund, but ultimately left it essentially intact.
Asked about the timeline for the development, Coburg administrator Schuetz said the unnamed company “is motivated to move forward expeditiously.”
One of the possible issues with the Coburg site is that it is only partially connected to Coburg’s new sewer system. An incoming company would have to pay system development charges to upgrade that connection, Schuetz said, and Coburg leaders have shown “no intention of waiving those fees” so far. The estimated cost of the needed upgrade is not known at this point, she added.
Materne, which in France is called Pom’Potes, is a privately held firm that began selling its applesauce pouches, called GoGo squeeZ, in the U.S. in 2008. The company’s U.S. operations grew from $6 million in revenue in 2009 to $100 million by 2011, according to Forbes Magazine. Today, Materne’s pouches are in Walmart, Target, Costco and Whole Foods.