By Ken Ross, Managing editor
The Little Sioux Corn Processors (LSCP) Board, meeting Tuesday evening, approved a $40 million expansion of the ethanol plant north of Marcus, which will raise production capacity from 52 million gallons a year to over 90 million gallons.
According to Mark Buschkamp, executive director of the Cherokee Area Economic Development Corporation, the expansion of the plant will add a minimum of 12 new jobs to the payroll. Production at the plant also has a secondary effect on employment in the county, particularly transportation jobs.
The processing has given a slight boost to corn prices locally and provided convenient availability of a high quality livestock feed supplement, which is a byproduct of the distillation process.
The LSCP decision on Tuesday evening followed tentative approval on Tuesday morning by the Cherokee County Board of Supervisor of tax incentives for the expansion.
Final binding approval of tax incentives cannot be given until after a public hearing. The vote on Tuesday was for the purpose of informing LSCP of the county's intentions. The vote by the supervisors was 4 - 0 with Ron Wetherell, chairman, abstaining because he is an investor in LSCP.
The incentives tentatively approved provide a 75 percent rebate of property tax for 15 years on the value of the future improvements. Only part of the $40 million project is subject to property tax. Only permanent fixtures increase the valuation of the property, not other equipment.
Also the supervisors agreed to allow LSCP to use up to $10 million of the county's bonding authority to issue revenue bonds for the project, a move that reportedly does not put the county "on the hook" for any of the money borrowed.
This will create a three-tiered property tax effect. On the original approximately $48,000 value of the pasture land on which the plant was built, there is no rebate of property tax, On the current property valuation of the plant (less about $48,000), LSCP receives a rebate of 65 percent of the property tax not exempt from the rebate, as approved for a 13 year period by the supervisors in 2001. On the increased property value resulting from expansion, there will be 75 percent rebated of taxes not exempt from the rebate.
Kris Glienke, finance manager for the Cherokee County Auditor's Office, asked supervisors Tuesday whether they could incorporate the two rebates into one rebate with one rate and one expiration date. Supervisors indicated that they have been critical of other counties where tax incentives seem to be extended forever.
"These things need to have a sunset," Wetherell said.
The rebated taxes affect not only county tax but the other taxing entities which include the Marcus-Meriden-Cleghorn School District. the township, community college and ag extension service. MMC has the largest portion of the property tax revenue, with miscellaneous entities receiving a small total percentage compared both to the school district and the county.
Although the other taxing entities will be affected and their input must be sought at a public hearing, the final decision rests with the board of supervisors, providing some assurance to the LSCP that the show of intention by the supervisors on Tuesday will be later formalized and made binding.
LSCP will not get a full 75 percent off of property and related taxes. A utility excise tax for natural gas and electricity, that is divided up among taxing entities in a manner similar to property tax, is not affected by the rebate. An increase in production means a proportionate increase in gas and electricity and a proportionate increase in gas and electricity tax revenue.
Also, the Physical Plant and Equipment Levy (PPEL), which is currently 91.7 cents per $1,000 valuation in the MMC school district, is exempt from the rebate as is debt service levy to pay off school bond debt, currently none in the MMC district.
A rebate does not actually affect revenue of a school district, since PPEL is exempt and total revenue for the general operating fund of the school district is not dependent on property valuation within the district. The state sets the total amount of revenue per pupil for the school district's operating budget. This is a combination of property tax and state aid set by state formula.
The amount of property valuation per pupil does not affect the amount of revenue received per pupil, just the rate of property tax required by the state to achieve that amount.
At the Tuesday supervisors meeting, Myron Pingel, of the LSCP, was present to request the rebate, along with Mark Buschkamp, director of the CAEDC.
Not only is demand for the primary product, ethanol, growing. There is also strong demand for the secondary product, distillers grain.
"The local market has exceeded our expectations," Pingel said referring to the feed supplement sold to area farmers. With most of the distillers grain sold locally, there is little that has to be shipped dried, saving processing and transportation costs and making the use of the secondary product a value added agriculture operation.
Pingel said that the expansion of the plant will likely mean shipping out much of the increase in distillers grain since the local market cannot currently absorb that increase.
Buschkamp noted that there is currently an effort to attract Dutch dairy farmers to the area to take advantage of the feed available.
Buschkamp noted that many counties are offering substantial incentives for the building or expansion of facilities similar to the one in Cherokee County. He said Buena Vista County offered a 15 year, 100 percent rebate with an additional five years at 75 percent to a different company.
"We appreciative of the commitment the county has made toward making this work," Pingel said, referring not only tax incentives but also including paving roads and assisting with utilities.