Will gamble on ‘clean energy’ manufacturing make up for millions in lost Richland taxes?

Richland has quietly foregone more than $9 million in property taxes to support its dream of becoming the Northwest’s center for clean energy manufacturing.

The city is the first in Washington to use a new suite of tax incentives designed to encourage clean energy and other manufacturing.

The 2022 Legislature created “Targeted Urban Areas” or TUAs to offer 10-year property tax breaks to companies that produce new family-wage jobs.

Richland established its sprawling TUA in January 2023 and subsequently awarded property tax waivers to ATI Specialty Alloys and Components in July and to French nuclear fuels manufacturer Framatome earlier this month.

ATI received a $2.6 million waiver in exchange for a $111 million expansion of its titanium melting plant in north Richland.

Framatome received about $6.7 million in tax waivers for the $360 million plant it is considering building at its campus on Horn Rapids Road.

Those are just the start.

Two more companies are eligible for the same breaks: Fertilizer giant Atlas Agro North America and battery parts manufacturer Cenate. Both are considering building plants in Richland though no final decisions have been made.

Collectively, the four represent a potential investment of more than $1.6 billion and the creation of hundreds of new jobs.

Worth the price

Richland is convinced property tax waivers support its economic diversification goals, Joe Schiessl, deputy city manager, told the Tri-City Herald.

New jobs translate to new people who buy or rent homes, shop and pay taxes that dwarf the costs. The city waivers affects its share of the tax bill and don’t affect other taxing jurisdictions, including schools.

“The overall benefit outweighs the cost,” Schiessl said. The city estimates the waived taxes will total $915,000 per year in foregone revenue once they are implemented. That won’t happen until the plants are built and operating, years in the future.

This year, the city expects to collect about $20 million in property taxes to support its $77 million general fund budget, which pays for police and fire services, the library, parks, planning and other municipal services.

Under the radar

Richland’s elected council approved the initial property tax waivers without public comment. Both were approved on the council’s consent agenda, when routine items such as bills and meeting minutes are passed on a single vote.

Mayor Theresa Richardson defended placing the waivers on the consent agenda instead of making them separate items for the council to discuss.

She said it discussed targeted urban areas and was comfortable with the information it had. Any member could have asked for a separate discussion and the public may comment during regular sessions, she said.

The city council voted to create the targeted urban area at its Jan. 17, 2023 session. It discussed TUAs again when it added 1,641 acres of former DOE land to the zone after it was annexed into the city.

ATI and Framatome were mentioned on the council’s agenda exactly once each, when they appeared on the consent agendas.

Potential payoff

The city may have taken a low-key approach to approving tax waivers, but Mark Harmsworth, director of the small business center for the Washington Policy Center, said TUAs are worthy of the spotlight.

Before the Legislature created the current targeted urban area program, the state had few incentives to offer manufacturers.

The ones it had were limited, he said. He cited a 2015 program that allowed cities in Snohomish County to give property tax breaks to aerospace manufacturers. It was limited to counties with populations between 700,000 and 800,000, essentially limiting it to a single county.

The 2022 version offers all cities and counties a chance to waive their share of property taxes in support of their own economic priorities, he said.

Harmsworth predicts Richland will see sales tax revenue increase as new jobs lead to additional spending at local shops and businesses.

“It offsets the tax that the city could have collected on the improvements of the property. That offset is a good thing,” he said. He predicts more cities and counties will embrace targeted urban areas, though Richland currently stands alone.

A 10-year tax break pales in comparison to the long-term benefit of a major manufacturer, he believes.

At the end of the tax waiver, the community is left with an established business that will probably carry on, creating new jobs and supporting the community, he said.

Karl Dye, president and CEO of the Tri-City Development Council (TRIDEC), said tax waivers are good policy. It’s no accident Richland has commitments from two major manufacturers, with two more in the wings. Without the TUA program, that wouldn’t have happened.

The waivers aren’t giveaways, he emphasized. Without them, the properties would have remained undeveloped, generating little to no activity.

“It’s honestly not luck. It’s a direct correlation to the incentives,” he said.

The deals

ATI Specialty Alloys and Component is already building three buildings at its 100-acre campus at 3101 Kingsgate Way. The 49,000-square-foot expansion will cost $111 million to construct and equip.

The company said it will add 93 new jobs, with 87 meeting the state’s “family wage” minimum of $23 an hour. It told the city wages will average $34 an hour.

The council agreed to waive approximately $245,300 in city property taxes annually for a total impact of $2.56 million.

Richland had to beat stiff competition for the expansion. The company secured $5 million in property tax consideration from Union County, N.C.

Framatome is considering a two-phased investment in fourth-generation nuclear fuel production at its Richland campus, 2101 Horn Rapids Road.

The first phase would result in a $39 million investment in a 13,459-square-foot facility that would employ 20, five fewer than the 25 required.

The second phase would dramatically expand the project, including the employment base. Phase 2 is a $335 million investment in a new 189,000-square-foot building with 200 jobs attached to the expansion.

The city estimates the total tax waived over 10 years will come to $6.7 million.

Framatome is not a done deal.

The state gives qualified companies five years to complete their projects, which isn’t sufficient for a nuclear fuel manufacturer subject to Nuclear Regulatory Commission approvals.

State Rep. Stephanie Barnard, R-Pasco, sponsored two bills in the current Legislative session to support Washington’s lone nuclear fuels manufacturer. One would give it preferential rates for business and occupation taxes. The other would extend the time frame to complete its project.

House Bill 1981 would award preferential business and occupation tax rates, while House Bill 2120 would give more time to qualify for TUA incentives.

Without an extension, Richland expects Framatome to build its plant in another state.

More to come

Atlas Agro and Cenate both are eligible for property tax breaks if they finalize plans to site plants in Richland’s special district.

Atlas Agro wants to build the Pacific Green Fertilizer Plant, billed as the world’s first carbon-free fertilizer plant at the corner of Stevens Drive and Horn Rapids.

Last March, the Port of Benton agreed to sell 150 acres to support the $1.1 billion proposal. The deal included a one-year feasibility study, with a decision expected by the end of January.

Atlas still must secure up to 330 megawatts of electricity. For comparison’s sake, Columbia Generating Station, the nuclear plant operated by Energy Northwest north of Richland, has a nameplate capacity of 1,200 megawatts.

Richland hasn’t included Atlas Agro in the electrical load forecast it provides to the Bonneville Power Administration, the federal marketing agency that provides the city’s power.

Clint Whitney, Richland Energy Services manager, explained that BPA requires 70% certainty a project will be built before it will accept it in a load forecast. The city will include Atlas once the commitment firms up.

Cenate, the other potential new manufacturer, intends build a 40,000-square-foot battery parts facility in either Richland or Butte, Mont. In November, the city agreed to sell a 50-acre site near Framatome to the Cenate for $3.7 million.

Montana is a fierce competitor. In an August announcement, Cenate said Butte offered “substantial tax abatements.” A decision is expected in mid-2024.

Game changer

Schiessl said he’s thrilled to have a TUA to promote the city and make the Tri-Cities less dependent on Department of Energy spending on the Hanford site cleanup.

Framatome’s proposal is one of the most exciting he’s seen in his 20 years in the business.

“Framatome’s growth represents true Hanford equivalent jobs,” he said.

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