Calumet Refining has requested a tax abatement on their new renewable fuel conversion project and the City Commission will consider the request during their May 3 meeting.
State law allows for tax abatement for new or expanding industry, during which the first five years after a construction permit has been issued, qualifying improvements or modernized processes are taxed at 50 percent of their taxable value. Under the law, each year thereafter, the property tax is increased by equal percentages until the full taxable value is reached in the 10th year.
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If approved, city staff estimates the loss of tax revenue for the city to be $2,777,982.
Calumet is converting a portion of its facility to renewable fuel production and estimates that it’s a $300 million project.
Calumet is working with the Montana Department of Revenue to get a permanent tax abatement on about $250 million of the investment, according to the city, which is a Montana State Air or Water Pollution Control and Carbon Capture Equipment Abatement.
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That decision is made by the state and is expected to be made at the end of the year, according to the city staff report.
Calumet is requesting a city tax abatement on the $50 million not covered by the state’s tax abatement.
The state law on tax abatements reviews review by both the city and county. If one approves the abatement and the other does not, the abatement will apply only to the mill levies by the approving governing body, according to the staff report.
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In December 2015, City Commissioners adopted review criteria for tax abatements.
Calumet paid $1,585,142 in city taxes in 2021, according to the city, which was about 6 percent of the city’s total tax revenue.
In 2016, Calumet requested a tax abatement that was estimated to be a $6 million loss of property taxes to the city over 10 years. Commissioners denied that request.
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Calumet protested their 2017 taxable value from the state that was set at $538 million.
The county tax appeal board lowered the taxable value to $312.5 million. The Montana Department of Revenue appealed that decision to the state.
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The protest was settled in 2020 and the city lost about $4 million in tax revenue over that three year period, according to the staff report.
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Staff hasn’t made a recommendation on the abatement request but states in their report that the commission “needs to weigh whether the benefits of the applicant’s investments in alternative energy production and company employment growth outweigh the impacts of reduced property tax revenue to the city’s general fund. Additionally, the commission must decide whether the project would be viable without the abatement incentive being granted.”
The commission recently approved two tax abatements for construction projects and staff wrote that commissioners should consider the impact of the cumulative total of the abatements.
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