The Enid News and Eagle, Enid, OK

December 12, 2012

Committee finds canola plant TIF needs a rework

By Robert Barron, Staff Writer
Enid News and Eagle

ENID, Okla. — The old saying “You can’t get there from here” seemed to be part of the discussion Wednesday during a meeting of the Tax Increment District Review Committee concerning a proposal for construction of the Northstar Agri Industries canola plant.

The problem is not that it can’t be done, but a change in the type of public-private split probably will be necessary, said Garfield County Assessor Wade Patterson. Patterson said a 75/25 proposal discussed at the last meeting might not be feasible, but a proposal for a 90/10 split between the project and taxing entities might be.

“It’s the same function, but a different percent. We have to make sure we cover all the debt service,” Patterson said.

Patterson represents Garfield County on the committee. The proposed Tax Increment Finance district would cover a 25-year period, the longest that has been done for recent TIFs.

It would include $15 million for investment into the private side of the project, and $12 million for public infrastructure. The public infrastructure work would cover the costs of reconstruction of 66th, to make it sturdy enough for truck traffic; sewer and water needs; and a railroad spur onto the plant property. The canola plant will need about 500,000 gallons of water a year, and city officials say that can be done.

A TIF district establishes an area in which increased ad valorem taxes will be delayed for a specific period of time. The funds would be used to defray the costs of project development.

Tax-receiving agencies would continue to receive taxes at the current property rate until expiration of the TIF, at which point property taxes would be paid out based on project improvements.

In the 90/10 or 75/25 split, the numbers are referring to how much goes into the private project and how much will return to the ad valorem taxing entities — Garfield County, Pioneer-Pleasant Vale Public Schools, Autry Technology Center, Garfield County Health Department and the city of Enid. With a 90/10 split, 90 percent of the funding will go to the private project and 10 percent returned to the ad valorem taxing entities. Using this year’s millage level, the property would generate $2.3 million, sending about $230,000 to be split among the taxing entities each year.

Dr. David Vanhooser questioned the water usage, saying the city rationed water use during the summer, in the midst of a severe drought.

The city is constructing two water towers that will make a difference in the ability to provide the water, said John Cromwell, Garfield County Health Department representative on the TIF panel.

Vanhooser said water still is a problem to him, and he is not sure it can be provided.

Vanhooser said he also was concerned about a draft resolution that was distributed by public finance attorney Nate Ellis. Vanhooser said he did not want to sign off on anything he has not read.

“I want all the T’s crossed and I’s dotted,” Vanhooser said. “I also want to make sure every dime goes to the project. I get the feeling if the revenue goes over, the money can be diverted elsewhere, and I want to make sure it all goes to pay debt and to the project.”

He said he talked with Ellis at the first meeting, saying the 75/25 split would not work. Ellis agreed with that during Wednesday’s meeting, saying with a $200 million plant value, “you can’t get there with a 75/25 split.”

Ellis anticipates a 4.4 or 4.5 percent taxable rate for the project, and said it must be a rate lenders are willing to purchase for a 25-year transaction. Much of the meeting was spent discussing financing scenarios, to determine where maximum funding is coming from and how to pay it through private sources.

Clarence Leschied, a representative of Northstar, discussed the plant and its benefits to area agriculture. There are enough “critical-mass” canola fields to warrant the construction of the plant at Enid, he said. The plant will manufacture food-grade canola oil and canola livestock feed. The initial annual capacity is estimated to be 345,000 pounds. AdvancePierre Food Co. is a large user of canola oil, and would use 35 percent of the Enid plant’s production, he said.

Northstar has purchased 300 acres and will build the $200 million processing plant. Leschied said the Oklahoma wheat yields are stagnant and have not increased in a number of years. Canola production is growing and may reach 1.8 million acres, he said.

Enid is in the main wheat-producing area of the state, which is one reason the plant is being located here. Canola also uses less water than many crops, about one-third as much as corn, he said. Leschied estimated an increase in production between wheat and canola of $650 million.

The 330 acres being negotiated is a large footprint, he said, but there may be other tenants in addition to Northstar. The company plans to educate area farmers about the benefits of canola, and said Oklahoma State University Extension Service has done a good job of that.

Leschied said the plant will be able to take direct delivery from farmers

No decision was made Wednesday, and a third meeting was scheduled for 8 a.m. Dec. 21.