City approves Calumet tax abatement
City Commissioners unanimously approved a tax abatement for Calumet Refining during their May 3 meeting that equates to the loss of an estimated $2.77 million in property tax revenue over the next decade.
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.
The refinery will still pay its current level of taxes and taxes on the improvements, but at a lower rate for several years until reaching the full 100 percent in the 10th year of the abatement.
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.
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.
During the May 3 meeting, Ron Colwell, general manager of Calumet’s Great Falls facility, said that there are currently about 500 temporary employees working on the conversion.
He said that those workers are spending money in the community and that was a benefit to the city, but that spending doesn’t translate into the property tax revenue collected by the city that funds public safety, parks and recreation and more. Most of those workers are from out of state, Colwell said.
Colwell said that at the beginning of the project, they’ll import feedstock until they can build the necessary equipment to use local feedstock in their biodiesel system.
Some officials and commissioners expressed concern about the refinery’s reliance on city public safety agencies, particularly fire, with the loss of tax revenue that supports those services.
Colwell said that Calumet has it’s own fire brigade and emergency response team that train regularly with Great Falls Fire Rescue, which responds to emergencies at the refinery.
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.
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.
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.
Jolene Schalper of the Great Falls Development Authority said that using tax abatement, which is one of the few tools the city has to encourage development, is something other developers and businesses will watch when considering coming or expanding in Great Falls.
She said that Calumet’s biodiesel conversion project will also put Great Falls on the map and that the project was a subject of conversation while she attended a bioeconomy conference in Washington, D.C. recently.
Schalper said the region needs more of these types of projects versus shipping products out of state for value added processes, losing that revenue and employment in this region.
Two people spoke in opposition to the abatement, seeming to think it was a measure to give money to a private company, which is not the case.
Commissioner Rick Tryon said that Calumet’s tax protest several years ago, “kind of put us in a bit of a bind. I just hope that we don’t have to go through that again.”
Commissioner Joe McKenney asked what Calumet’s future plans for the former Westgate Mall property are, though Mayor Bob Kelly pointed out that wasn’t relevant to the tax abatement discussion.
Colwell said the former mall property, which Calumet owns, had a planned unit development zoning and if they wanted to do any refinery operations in that area, they’d need to change their zoning, which requires commission approval.
He said they didn’t see a benefit to that since they’d have to cross a public road to do anything industrial on that property.
“We don’t see a future where we’re building anything heavy industrial on that piece of property,” Colwell said.
Mayor Bob Kelly said it’s a high profile project that will bring in new employees.
He said that the city wasn’t in a position to approve an abatement for Calumet several years ago, and approval has to strike a balance of benefit to the company and also the community.
When any entity protests their taxes, as Calumet did, Kelly said, “that causes a great consternation for us.”
He said that businesses disagree with their tax assessments, they should protest them, but “it doesn’t go unnoticed,” in the community.
Kelly said that “Calumet’s been a good citizen, they’re good taxpayers.”