Published: April 02, 2009 09:27 am      

City fighting to hold onto ADM tax dollars

City officials, ADM sparring over whether plant should be centrally or locally assessed

Timeline of utility tax events

• On Oct. 3, 2008, Clinton City Assessor John Moreland sent a letter to the state of Iowa, asking if ADM’s cogeneration plant would incur local or central assessment.

• In a letter dated Dec. 3, 2008, Moreland received a note from the Iowa Department of Revenue, stating that ADM’s co-gen plant would provide electricity to its corn processing facility and polymer plant.

• Moreland received another letter in February, with ADM stating it would stand by statutes and rules when property qualified for the replacement tax.

• The state of Iowa, the city of Clinton and ADM meet in Des Moines Monday to present its case regarding recently drafted legislation.

• The groups will meet again in May to further the discussion.



CLINTON — The city of Clinton planned a future full of projects to help improve the city’s look, economy and attitude, relying heavily on funds from its biggest employer, Archer Daniels Midland.

Now, that financial backer could dent the city’s pocketbook to the tune of an estimated $3.6 million because of a discrepancy between state and local tax assessment regarding ADM’s cogeneration plant.

Clinton Mayor Rodger Holm said the city hired a law firm to fight ADM’s withdrawal from the Urban Revitalization agreement, something the Clinton City Council approved a little more than three years ago. That plan helped ADM receive a tax abatement over 10 years, giving it an 80 percent abatement during the first year (2009), until depreciating yearly before earning an abatement of 10 percent during the period’s final two years.

With a central assessment, ADM could not abide by those regulations. If assessed centrally, Clinton would receive approximately $800,000 a year from the co-gen plant. If taxed locally, by the end of next year, the city would collect approximately $1 million in local taxes, and eventually ADM would pay approximately $4.4 million after the abatement process.

“Our capital improvement plans in the future will hurt us,” Holm said in an interview with the Clinton Herald. “That’s why it’s such a devastating blow. We reorganized our city government, planning on this $4.4 million after 10 years. Add that up, and that’s huge.”

Under current law, a self-generator, like the co-gen plant, is subject to local property taxes if the facility generates electricity solely for its own purpose. However, the discrepancy appears when another person or entity consumes the electricity, and then the self-generator would adhere to replacement (state) tax guidelines, not local property tax.

New legislation started recently in the Iowa Senate Ways and Means committee, chaired by Sen. Joe Bolkcom, Iowa City-D, that attempts to eliminate parts of the current law’s wording. This bill would make the self-generator exempt from the replacement tax and subject to local property taxes if it is a shareholder, member, beneficiary, partner or associate of the entity it shares electricity with.

In a letter dated Dec. 3, 2008, Clinton City Assessor John Moreland received a note from the Iowa Department of Revenue, stating that ADM’s co-gen plant would provide electricity to its corn processing facility and polymer plant. ADM shares ownership of the polymer plant with Metabolix.

ADM released a statement to the Clinton Herald, noting, “Iowa law currently provides for cogeneration facilities...to be centrally assessed by the Iowa Department of Revenue. The city of Clinton seeks to change the law so that the cogeneration facility would be assessed by the local city assessor. ADM has a disagreement with the city of Clinton regarding its attempt to change the law.”

Holm said the city approached local state Rep. Polly Bukta, D-Clinton, and state Sen. Roger Stewart, D-Preston, after hearing about the possibility of the co-gen plant being centrally assessed.

“This code was established years ago and they’ve (state of Iowa) never had this problem,” Holm said…“But this isn’t a done deal, and we had a very good meeting in Des Moines.”

Officials from the state of Iowa, Clinton and ADM met earlier in the week about this topic and the suggested legislation. Mark Schuling, co-chairman of the Utility Replacement Tax Task Force, also attended the meeting and provided an opinion regarding the new legislation.

The state formed the task force to provide insight into pending legislation. The group makes a recommendation for lawmakers.

Ultimately, the task force opted not to promote the statute, but Schuling said the group will meet again to further the discussion. The Chapter of the Sierra Club lobbying group in Des Moines sided with the potential law change, while the Association of Business and Industry, Missouri River Energy Services and ADM are against the measure.

“This meeting came up quickly,” Schuling said. “The legislature would be out of session in a couple of weeks and we wanted to move on this.

“Ultimately we were concerned with a lot of other issues (in the legislation), some of them unforeseen. We don’t want to make a change without analyzing the law, because this is a very complicated chapter.”

Without the legislation, Holm said ADM will most likely be centrally assessed for 2009, sending approximately $400,000 to the city, instead of the estimated $500,000 for this year.

Holm said this year’s budget should not be affected, since the city didn’t overestimate its tax revenue. The groups will meet again in May.