Processors hope for a good sign

Gov’s approval will extend tax incentives for value-added salmon industry

Posted: Sunday, February 19, 2006

A bill headed for Gov. Frank Murkowski’s signature would extend a product development tax credit to salmon processors, including companies on the Kenai Peninsula.

Legislation passed three years ago established a development tax credit program meant to encourage Alaska processors to install new equipment for the manufacture of value-added salmon products.

That program has proved fairly successful — enough so that state lawmakers this January approved a bill that extends the tax credit program another three years,. The bill now awaits the governor’s approval.

Becky Hultberg, Gov. Murkowski’s press secretary, said Tuesday the measure appeared to raise “no significant issues” that might lead to a veto, that she was aware of.

Processors on the Kenai Peninsula that already have benefited from the 2003 tax incentive say the extension is needed and likely will spur further development of value-added products.

“We have taken advantage of the tax incentive program to the fullest extent possible,” said Paul Dale, president of the Kenai-based Snug Harbor Seafoods Inc., whose company used the money it saved to purchase and install new equipment for filet production, including an expensive machine for removing pin bones. “It’s a completely useful program — useful for the industry, period.”

Jeff Berger of Deep Creek Custom Packing Inc. said he likes the tax incentive program but currently is appealing a ruling that equipment he installed, which grinds up salmon waste to produce dog food often sold to mushers, did not fulfill the requirements of the tax incentive program.

“There was some technicality as to exact timing and determination whether the equipment fell under the tax credit for salmon utilization,” Berger said.

The bill headed to the governor attempts to clarify definitions about the types of equipment eligible, but it wasn’t clear if the new criteria might alter the decision on his grinding equipment.

Berger said he likes tax incentive programs more than out-and-out development grants, in part because incentive programs help companies already in the business, while grants sometimes result in more competitors — competitors funded by public money, something he considers unfair.

“For companies like mine, which has been in the business 35 years doing secondary (value-added) products, it is great for the public sector to help the industry (through tax credits),” Berger said. “But don’t help existing companies go out of business by funding new competitors.”

Deep Creek Custom Packing has taken advantage of existing grant programs. In 2003, the company got a Fisheries Economic Development Grant for various kinds of equipment, according to state Office of Fisheries grants administrator Debbie McBride. She said Deep Creek applied for economic aid through the grants and incentive programs.

McBride agreed that the grant program is competitive and open to all applicants, and indeed may create new competition.

“That’s the nature of the program. You can’t really avoid that,” she said. “But the idea is to create value-added across the board. That is what we have done.”

McBride said the quantity of value-added fillets on the market “increased dramatically” as a direct result of the equipment funded through the grant and incentive programs.

The bill defines qualifying equipment as machines specifically used to add value to salmon products beyond simply gutting, and specifically excludes such things as vehicles, forklifts, conveyors and other machines used mostly for moving product around. The bill would extend the deadline for applying for the tax credit another three years — through the end of 2008.

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