AC ethanol plan doubles, 'it's 100%'

Thursday, November 18, 2004

Company has stipulations for county

One of the developers of a proposed $113-million, 100-million gallon a year ethanol plant at Albert City Wednesday said the chances that Fagen Management of Granite Falls, Minn. will go ahead with the project are now "a hundred percent."

However, that assurance is based on a number of things falling in line with the Buena Vista County Board of Supervisors. Matt Sederstrom, who owns an interest in Fagen Management along with Ron Fagen, laid out Fagen's conditions for building the Albert City plant after a public hearing in which the proposed rezoning from agricultural to industrial for the plant received resounding support. The good news about the project is that Fagen is doubling the size of the project from 50 million to 100 million gallons a year.

Sederstrom projected 42-45 jobs with a $2.1 million annual payroll. He said Fagen has built 65 percent of all ethanol plants constructed in the country over the past five years and half of all ethanol plants currently in production nationwide.

After Sederstrom anticipated environmental concerns, a number of Albert City residents, including some who live next to the proposed plant site, offered their support.

"No one is not in favor of the plant," said Albert City realtor and insurance agency owner Verne Hillmer. "We believe this will be a boon for the county, Storm Lake, as well as Albert City."

Norm Hanson who lives one-eighth of a mile from the proposed plant site also spoke in favor of the Fagen project. "As far as I'm concerned, I think it would be a heck of a good deal," Hanson said.

Fagen is asking the county for a 20-year tax abatement on any tax increases on the property. According to Fagen's estimates, that amounts to $340,000 a year, or about $6.8 million over the 20-year life of the abatement.

In addition, Fagen is asking for the county's assistance in fronting a $5-million urban renewal bond issue. Fagen would repay its loan on the bond issue over 10 years. Fagen would also seek a state sales tax exemption through the New Jobs and Income Program. That would not affect the local option sales tax.

Supervisor Jim Gustafson questioned the 20-year exemption period.

"I am struggling with the 20-year," Gustafson said. "It's a long, long time without any taxes." Gustafson has before gone on record questioning extended tax-exemption periods, most notably a 20-year exemption period for Storm Lake's Project Awaysis.

Essentially, what Fagen is asking is not a total forgiving of taxes but a tax freeze at the current level of $1,500 which is based on current ag use. While there is actually no direct cost to the county, the county would indirectly be subsidizing the project by forgoing the tax increase after the project is complete.

Kathy Showalter of PlanScape Partners, which is handling the financial package for Fagen, said the county would receive the full amount of taxes after 20 years, citing an average projected plant life of 50-60 years.

"You have no county debt because there's nothing in the general levy that goes to the county debt," Showalter said. "We are asking for an abatement of property taxes."

Sederstrom said Burlington, Iowa abated taxes for 20 years plus 90 percent of the property tax increase for 10 additional years. Sederstrom said one Missouri plant abated the entire property tax increase for 30 years.

Gustafson insisted that he was watching out for taxpayers by questioning the 20-year abatement.

"It seems to me the local option sales tax is going to make you far more than you're losing on the property tax," said one man present.

Another man said new housing from workers at the plant will offset any loss of property tax revenues from the abatement.

Jim VerMeer of Corn Belt Power Cooperative said the county needed to look at ancillary income the ethanol plant would provide. "It helps bolster that vitality of your rural economy, your local economy," VerMeer said.

One example of that contribution to the local economy, said Sederstrom, would be the wages Fagen would pay out during construction.

"We will be looking for good, local talent" to build the plant, Sederstrom said. He said Fagen will need electricians, welders, and other skilled tradesmen for the project.

Gustafson stuck to his guns.

"We've got to have some discretion on taxpayer dollars," Gustafson insisted. He said he had no problem though with the $5 million Fagen sought through the bond issue.

Supervisor Dick Vail sided with Gustafson's question about the 20-year abatement, suggesting that an abatement of five or ten years would help the county pay for added road maintenance.

Showalter said Fagen could write into its agreement that if it did not make good on its loan repayments that the tax abatement would be returned to the county.

Meeting the loan portion of Fagen's funding package request of the county would barely scratch the county's constitutional debt limit. Auditor Karen Strawn said the county's debt limit was about $50 million. The county is at about one-tenth of that limit now with the bond for Buena Vista Regional Medical Center, the county landfill, and the dredge for Storm Lake.

VerMeer insisted that the supervisors seize upon the opportunity to bring the plant to the county.

"If this doesn't happen in Buena Vista County, you have no opportunity," VerMeer said.

Board Chair Herb Crampton assured Sederstrom that the supervisors would likely have an answer by Nov. 30.

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