Assembly to consider tax break targeted at fertilizer plant

The owners of the long-shuttered fertilizer plant in Nikiski may get another incentive to reopen it.

 

International fertilizer company Nutrien, formerly known as Agrium, owns the plant on the Kenai Spur Highway near the unincorporated community of Nikiski. Since the company closed the plant in 2007 due to uncertainty in natural gas supply, politicians locally and at the state level have been pitching ideas to lure the company back. So far, the efforts have been unsuccessful.

The Kenai Peninsula Borough administration is jumping on a chance to extend a time-limited property tax exemption offer to economic development properties, primarily targeted at Nutrien’s plant in Nikiski. Borough Mayor Charlie Pierce introduced an ordinance at the Kenai Peninsula Borough Assembly’s Feb. 20 meeting that would modify the borough’s code, allowing the borough to partially defer or waive property taxes for properties being used to create a new business or reopen one that has been shuttered for five years or longer.

The exemption could last for up to five consecutive years and be up to 50 percent of the assessed value.

The Legislature passed a bill, known as Senate Bill 100, in 2017 that allowed municipalities to enact such a property tax deferral. The ordinance before the assembly amends borough code to match that, Pierce said during the meeting.

“State code allows a provision for this but our code currently does not,” he said.

The ordinance does not specifically mention Nutrien’s plant, but Pierce said that would likely be the first suggested recipient. John Quick, Pierce’s chief of staff, said the ordinance is intentionally broad to allow for the incentive to be extended to other businesses that could be considering moving to the Kenai Peninsula.

The ordinance also provides another condition for allowing an exemption: whether the tax break would “enable a significant capital investment in physical infrastructure” that either expands the tax base of the municipality or generates property tax revenue after the exemption expires.

In Nutrien’s case, that could be about $1 million per year, Quick said. When it was operating, the company paid about $2 million in property taxes for the plant. Before it closed, Agrium was a significant property tax payer in the borough and employed about 230 more people than it does today, with some of the highest salaries in the borough at the time.

Pierce told the assembly he would probably favor a partial exemption.

“I’m thinking two years to help offset some of their initial startup costs,” he said.

Nutrien has reportedly been evaluating the costs of refitting and reopening the plant. After the Legislature approved House Bill 100, sponsored by Rep. Mike Chenault (R-Nikiski), in 2016, the company has access to a corporate tax income credit equal to its royalty payment to the state.

The company doesn’t have an exact dollar figure for what it would take before reopening the plant makes sense, said Nutrien corporate spokesman Adam Diamond. The incentives have weight in the decision, but they aren’t the only factor, he said.

“That certainly goes into the mix,” he said. “I don’t know whether there’s one particular thing that (makes the company think), ‘If we get this, then we move forward.’”

Among those factors is the natural gas supply. Contract lengths for natural gas suppliers have gradually shortened, making the gas market more uncertain, and the supply in Cook Inlet has lessened as producers have withdrawn. Hilcorp’s advent into the Cook Inlet has increased supply, but the question remains whether Nutrien will have access to affordable natural gas supply, making the operations economical for the company.

Pierce said if the assembly approves the ordinance changing the code, any proposed exemptions specific to a company would have to come back before the assembly for approval.

The assembly is scheduled to hear the ordinance next at its April 3 meeting.

Reach Elizabeth Earl at eearl@peninsulaclarion.com.

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