The Enid News and Eagle, Enid, OK

December 21, 2012

Committee gives nod to canola plant TIF

By James Neal, Staff Writer
Enid News & Eagle

ENID, Okla. — The Enid Tax Increment Review Committee approved a resolution Friday calling for up to $27 million worth of incentives to bring a canola processing plant to the city.

The committee passed a resolution recommending city commissioners create a Tax Increment District from which Northstar Agri Industries would be compensated up to $15 million for the construction of a plant estimated to cost $200 million. The TIF district also would compensate the city of Enid for more than $12 million worth infrastructure improvements required to build the plant in Enid.

A Tax Increment District creates incentive for new development by allowing a portion of the ad valorem tax revenue created by building new business to be returned to the developing company to defray start-up investment.

The city of Enid and Enid Regional Development Alliance have negotiated terms with Northstar that would entice the company to build the processing plant on almost 400 acres between 66th and 78th about one mile north of U.S. 412.

Previous discussion before the TIF Review Committee included an option in which 75 percent of the increase in ad valorem taxes would be put toward TIF revenue, while 25 percent would go to the public ad valorem tax-receiving agencies.

The proposed canola plant would be built in the Pioneer-Pleasant Vale Public Schools district, which relies on ad valorem taxes to fund general operations, building maintenance and capital debt service. The school district currently carries a combined ad valorem tax levy of 54.02 mills.

Other tax-receiving entities affected by the proposed TIF district are: Garfield County general fund, 10.54 mills; Garfield County school levy, 4.22 mills; Garfield County Health Department, 2.64 mills; city of Enid sinking fund, 4.96 mills; and Autry Technology Center, a combined levy of 15.7 mills.

Nathan Ellis, of Oklahoma City-based The Public Finance Law Group, brought a pair of proposals to the TIF Review Committee Friday after concerns were raised that paying out 25 percent of the increased ad valorem revenue to the tax-receiving entities would not leave enough revenue to offset Northstar’s development costs and bring the plant, and its jobs, to Enid.

Ellis presented an option that would have utilized 100 percent of increased ad valorem revenue as TIF proceeds, and a proposal for a 90/10 split, with 90 percent of increased ad valorem revenue from the plant going to TIF revenue and 10 percent going to the public entities.

The 90/10 split would be on a term of 25 years, while the 100 percent option would pay off the TIF obligation and the city’s debt service in 23 years.

Ellis said the 90 percent mark was the lowest split between private and public that would generate at least $12 million in compensation to Northstar, the benchmark for bringing the company to Enid.

“The 90 percent revenue option guarantees sufficient revenue to pay all the city commitments, including debt service,” Ellis said. “It gives Northstar an incentive, but it also gives them an impetus to continue to invest.”

ERDA Executive Director Brent Kisling said the level of Northstar’s reimbursement would depend on how much it invests in the plant.

“We have never promised $15 million to Northstar,” Kisling said. “We have offered them a maximum of $15 million ... but it always has been dependent on what their investment is.”

Estimates for the plant investment range from $150 million to $250 million, with TIF compensation ranging from $12 million to no more than $15 million.

When it came time to finalize the resolution Friday, there was only one member of the committee in favor of using 100 percent of the TIF proceeds for debt obligations.

Dr. David Vanhooser, who represents the Enid/Garfield County Metropolitan Area Planning Commission on the TIF committee, raised the sole voice in opposition Friday to the 90/10 split.

Vanhooser argued for applying 100 percent of the TIF proceeds to paying down the city’s debt service earlier, in addition to meeting the incentive reimbursement to Northstar.

“We’re going to have to pay back this $27 million, which translates to about $50.5 million with interest,” Vanhooser said. “I think it’s not responsible for us to use less than 100 percent of this revenue to pay back the debt. I think that’s what would be the best thing for the city.”

The committee, with the exception of Vanhooser, voted in favor of the 90/10 split on a term of 25 years.

Under the terms of the proposal, all tax-receiving entities would continue to receive ad valorem revenue from the current assessed value of the 399 acres on which the plant will be built, plus 10 percent of any increase in ad valorem revenue due to the plant’s development over the next 25 years. Once the TIF expires, the tax-receiving entities could see a combined net gain in their ad valorem revenues of up to $2.2 million per year, according to figures provided by The Public Finance Law Group.

During the 25-year term of the TIF, the county assessor’s office would assess the value of the Northstar plant in the same manner as any other commercial property.

Northstar would be required to pay its full value of assessed ad valorem taxes to the county. Ninety percent of the increase in ad valorem revenue would be put toward Northstar’s maximum of $15 million in compensation for development costs, to compensate the city for its $12.17 million investment in roads and utilities needed to support the plant, and to make interest payments on both obligations.

Over the 25-year term, the TIF district would generate $50 million in ad valorem revenue, according to figures provided by Ellis. Of that $50 million, $5 million would go to the tax-receiving entities over 25 years, and $45 million would pay for Northstar’s compensation up to $15 million; the city’s $12 million in infrastructure improvements; and 25 years’ worth of interest on the obligations to both Northstar and the city, more than $23 million.

The TIF resolution next will be considered by the Metropolitan Area Planning Commission, and then must go before Enid City Commissioners for final approval.

If the resolution is approved and the TIF district created, Northstar plans to have the canola plant fully operational by March 2015.

The Northstar canola plant will have an estimated $3.75 million annual payroll with 55 full-time jobs.

The plant will be able to process 2,200 tons of canola per day, or 760,000 tons per year. It will include a full refinery capable of annually producing 580 million pounds of food-grade refined canola oil and 450,000 tons of canola meal.

Staff Writer Robert Barron contributed to this story.