Testifying before the House Finance Committee on April 20, 2007, Gary Bauer, director of government and community affairs, NW Natural, told the members that a $51 million pipeline built to bring natural gas to Coos County and operated by his company was “never considered economic”. Funded by a $27 million bond sold to the voters with the promise it would bring 2,900 jobs to the struggling county and an additional $24 million from the Oregon Lottery Fund construction was completed in 2004.
Yet three years later Bauer and Coos County Commissioner Nikki Whitty were speaking in support of special legislation to exempt NW Natural from ad valorem tax on its use of the pipeline. NW Natural during all its negotiations with regulators, the PUC and customer groups had failed to factor in property taxes assessed when a private for profit entity operates public infrastructure. Bauer explained that while the project “never met the test” for economic viability, even before developers broke ground, it is “…essentially fulfilling a public purpose that would justify exemption from the tax.” The bill, HB 3046 co-sponsored by then Represenative Arnie Roblan and unique to Coos County passed.
[audio:http://mgx.com/blogs/wp-content/uploads/2010/11/Nikki-Salem.mp3|titles=Oregon House Revenue Committtee April 30, 2007]
Considering Bauer’s testimony it is difficult to understand why the pipeline was developed at all and demand for natural gas did not meet even the meager expectations of NW Natural. According to Commissioner Bob Main, the 12″ pipeline operates at just 5% of its capacity. Some of the same companies quoted in ads promoting the bond measure have yet to tie into the line almost ten years later. Thanks to the Oregon legislature the return on this $51 million taxpayer investment is and will be less than zero.
As bad a deal as the Coos County pipeline has turned out to be at least the public got to vote on whether to take the gamble. Not so with the International Port of Coos Bay and its purchase and renovation of the Coos Bay Rail Link. After the former owners, RailAmerica embargoed the line in 2007 because there wasn’t enough current or expected volume to run the line profitably or make necessary repairs the port purchased the line for $16.6 million, the scrap value of the rails. Using state and federal grants the port spent an additional $31 million renovating the line to where it can now haul freight at 10 MPH between Coos Bay and Eugene and anticipates a minimum additional $60 million for bridge and tunnel repair.
The Port of Coos Bay which operates as an economic development agency under ORS 777 has yet to provide the public with an analysis of just how much public money will be spent to offer its twelve shippers the choice of rail over truck. If jobs are saved or created by reinstating the line, how much is each job actually costing the taxpayer? When I asked Coos County Commissioner John Sweet what data he was using to assure him that continued public investment in the rail line was helping the county he avoided the question and simply responded that “shipping by rail is always cheaper than by truck”.
Thanks to The Register Guard, Coos County residents learned that Senator Roblan and Representative Caddy McKeown co-sponsored a bill that will “eliminate an annual property tax bill of about $180,000” imposed upon the private for-profit operator of the line. Just as NW Natural and the economic development agency pushing for the pipeline, the port in its role as an economic development agency was also caught unawares that its operator, American Railroad Group Transportation Services would be expected to pay property taxes.
[audio:SenateHearingRailLink.mp3]
The bill which is expected to pass will cost Coos County school districts almost $300,000 before it sunsets in ten years. Port CEO David Koch justified the exemption saying that while the port is “getting a lot of grant money” that money doesn’t cover his or any staff time spent toward rehabilitating the line. He goes on to explain that only two of the dozen shippers are within the port taxing district and therefore Lane County and all these other districts are “getting off pretty cheap”.
Koch’s confidence that his time and the time of his staff is worth reimbursing is not supported by some of the actions taken by the port. As an example, McKeown testified to the Senate Finance and Revenue Committee that the port was collecting a surcharge for every rail car. An email to Elise Hamner asking for a business plan and how much the surcharge is has not been answered, although she is apparently busy researching and sending thousands of documents to the Sierra Club. During the last port commission meeting it was revealed that the port is exploring the possibility of a surcharge and in discussion with its shippers, something that ought to have been considered $48 million ago.
The individual contributions made by each taxing district may seem insignificant but one pipeline here and a railroad there and a few enterprise zone exemptions and the loss of revenue to one county can start to add up. Does Salem keep track of just how much money it takes away from each county and if a county is driven into insolvency, who is responsible?
“Does Salem keep track of just how much money it takes away from each county… “?
Yes, and here’s the current report:
http://www.oregon.gov/dor/STATS/docs/ExpR11-13/tax-expenditure-report-2011-2013.pdf
It contains some very interesting reading. Search within the PDF document on terms like “Coos,” “pipeline,” and “standing timber.”
Great information! Thank you
Yes, I also heard David Koch say: “. . . of the 12 shippers on the rail line only two of them are located within the port district, ah, Georgia-Pacific and ah, ah, Roseburg Forest products, I’m not sure Hauser is included within the boundaries of the Port District because it’s the boundaries of the Coos watershed . . .”
I’m quite sure he’s wrong on several counts. As I recall, during the 1987 election that robbed the Port’s voters of their elective rights, the Port got additional goodies such as adding territories to the Port District including Lakeside. The Port doesn’t seem to have a current map of the Port District on its website, but I would think Hauser would have been included in that annexation – and Hauser has a mill. And the North Spit industrial lands ARE included in the District for sure, which means Southport Lumber would be yet another local shipper. There may even be more, like the dairies getting grain by rail, even though they don’t use a lot of rail cars.
Finally, at the time of CORP’s abandonment of the line, it was known that the GP and the Roseburg mills together had accounted for 83% of the carloads on the line. Against that, all other shippers (including American Bridge) pale in comparison. Isn’t it remarkable how ecodevo artists can say anything with conviction and be taken seriously?