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Tax break for US Enrichment Corp. project at ETTP

 
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Ellen
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Joined: 15 May 2004
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Location: Oak Ridge, Tennessee

PostPosted: Tue Apr 26, 2005 12:18 am    Post subject: Tax break for US Enrichment Corp. project at ETTP Reply with quote

This story appeared in last Wednesday's Knoxville News-Sentinel. I am glad it was pointed out to me, as I failed to notice it. From http://www.knoxnews.com/kns/local_news/article/0,1406,KNS_347_3713147,00.html:
Quote:
Centrifuge maker gets tax break

By BOB FOWLER, fowlerb@knews.com
April 20, 2005


OAK RIDGE - A company making centrifuges for enriching uranium has received a six-year, 100 percent tax break on its equipment and other personal property.

Members of the Oak Ridge Industrial Development Board granted the tax abatement to the U.S. Enrichment Corporation. Monday's vote was unanimous.

The tax break would be on nearly $15 million of equipment that is being installed in two buildings USEC leases in Oak Ridge.

Officials said the abatement would be on both city and county property taxes....

...The development board can award tax breaks if companies fit a matrix that shows the city will benefit in several ways from a company's long-term presence.

My first reaction when I was told about this story was disbelief. "How can the IDB give a property tax break to a company operating on federal land?" I wondered. The article answers that question -- the tax break is on equipment and other property that that tax law quaintly refers to as "personal property." USEC owns that stuff, so they can deed it over to the IDB (with a provision that returns it to them later on) in order to get a tax break.

But that leads to another question: "Why is the IDB giving a tax break for a business activity that is already here and has no real alternatives* besides staying where it is?" Question I don't have an answer to that question yet. Confused I suspect that the answer is in the article, though: The development board can award tax breaks if companies fit a matrix... That "matrix" is a set of criteria that are supposed to identify business projects that will bring benefits to Oak Ridge and Roane County (usually good new jobs and revenues), or that will occupy vacant industrial space in the city. It is not supposed to benefit businesses that are already here. However, it already had been used to help a business that was being evicted from the ETTP (so DOE could "remediate" their building by tearing it down) to relocate elsewhere in Oak Ridge, so it stands to reason that other businesses would be lining up to ask for similar deals, and if the IDB can grant these deals, they will grant them. Sad That's the trouble with incentives -- once governments start granting them, there's no end to the requests and the grants...

    * USEC's activity in Oak Ridge (in partnership with Boeing-Oak Ridge and Honeywell International) is building centrifuge parts to use at the $1.5 billion American Centrifuge plant it is building in Piketon, Ohio. That plant will enrich uranium for use in nuclear reactors, using a current version of the gas centrifuge technology that was developed in Oak Ridge back in the 1970s. USEC assembles centrifuge parts at the Centrifuge Technology Center on Boeing Road, then tests them at the K-1600 Building at the former K-25 site (East Tennessee Technology Park; ETTP), employing a total of 117 people. It seems to me that there are few other locations for this project, and work started several years ago to get these particular facilities ready, so USEC would have a hard time taking the work somewhere else. The news article quoted Doug Janney, development board chairman, who said "It's good to have an important national project like this in our community,'' but he failed to mention that it was sited here before anyone suggested IDB tax breaks.
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Ellen
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Joined: 15 May 2004
Posts: 209
Location: Oak Ridge, Tennessee

PostPosted: Wed May 18, 2005 11:50 pm    Post subject: Reply with quote

It has been suggested to me that the most important issue with this particular tax abatement is that the project is expected to end before the tax abatement expires.

That detail does not change my impression that the tax abatement "matrix" is ineffective at meeting its objective of stimulating business investments that will bring economic benefits to Oak Ridge.

Next Monday, City Council will consider adopting the very same "matrix" for tax incentives in the Anderson County part of Oak Ridge. I hope someone is willing to ask whether this is a good idea. Confused
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