On Calumet: Red Lobster Or Red Herring?

Philip M. Faccenda on January 26, 2017

Ask your average person on the street what they would like to see relative to economic development in Great Falls and there is a good chance they would say, “Red Lobster.” Then ask them if they would rather see a Red Lobster, or an expansion of the Calumet Refinery, and again they would probably answer, “Red Lobster.”

Evidently, the citizens and the Great Falls City Commissioners are in sync. The City Commission’s unanimous decision to deny Calumet’s application for a graduated tax abatement was shortsighted and unfair to the company, which recently made a $454 million dollar commitment to the future of the only true manufacturing company left in Great Falls. By that, I mean a manufacturing facility that takes a raw material and makes something out of it.

Since 1922, the refinery has processed crude oil, first the Shelby fields, and more recently from the Bakken fields and Eastern Montana, and produced fuels and asphalt we use every day. The refinery is the remaining operation of what was once a booming Great Falls manufacturing backbone that supported many local families by providing good paying jobs. Of course, agricultural processing is also as old as Great Falls itself, but gone is the potato chip company, the corn nut company, the foundry, the brick plant, and of course, the Anaconda Company. These companies provided great paying jobs that supported families, educated young people and donated to our community in many ways – in addition to paying taxes.

The City’s staff report confirmed that Calumet’s application met all statutory eligibility criteria, that the expansion had a significant positive effect on the overall tax base of the City, that it had a positive impact on employment, that it will likely result in additional industrial development, that it contributes to the goals of the City’s Growth Policy, and that, overall, it is in the best interest of the City. The Calumet expansion is responsible for the creation of 40 new refinery jobs, and should spin off 276 new jobs worth a total earning impact of $14 million annually. Calumet paid $3.9 million in County property taxes in 2015 and with the abatement schedule it still would have paid a total of $46.5 million through 2026.

So what’s the rub? Well, with the tax abatement on the new investment of $454 million, Calumet would contribute $6 million less to the City and $6 million less to the School District over 10 years, but that would not have reduced its existing tax liability, only the future tax liability of its $454 million expansion. In other words, Calumet is being penalized for making a huge investment in our community, while other companies making much smaller investments have received tax abatements.

Recently, Brett Doney of the Great Falls Development Authority reported to the City Commission that the City lost 707 jobs in 2016 and that he has never seen numbers so scary in his 32 years working in economic development. But aren’t these exactly the types of jobs the City should be doing everything in its power to attract and retain?

You can have your personal opinions about tax abatement incentives on a whole, but the City’s denial of Calumet’s application was wrong, shortsighted, and not in the best interest of Great Falls.

On one hand, we don’t have a Red Lobster because we are half the size of Billings and not growing at the same rate as the other major cities in Montana.

The City’s decision to dismiss Calumet, by far our largest manufacturer and one of our community’s leading charitable donors, sends an ominous message to businesses: “You, and all of those you would employ, would be better off someplace else.”

And that is the real reason why Great Falls does not have a Red Lobster.

Gregg Smith And Rick Tryon Discuss The State Of Great Falls

ECB Staff on January 24, 2017

Recently, the Tribune’s Peter Johnson wrote about Great Falls’ building boom; 2016 was the City’s strongest year for development since 2008. A lot of folks agree with the notion that Great Falls is on the uptick, while others point to a lack of good-paying jobs, low population growth, and drug abuse as significant community problems.

We thought we’d ask Gregg Smith and Rick Tryon to participate in an email back-and-forth to tell us what’s really going on in town…

ECB STAFF: In your most recent Tribune column, Gregg, you concluded that, on a number of issues (including opinions of Great Falls), “maybe all sides are right.” Rick wrote in the comments section:

“I mostly agree with my friend Gregg here but take a little exception with the implication that someone has to get a bank loan and open ANOTHER casino or gas station before they can credibly comment on the state of the GF economy. I think that anyone who busts their butt everyday at the 2 or 3 jobs it sometimes takes to make a living here is fully qualified to comment any time they please …”

Gregg, does Rick have a point here, and moreover, how do you generally assess the state of Great Falls moving into 2017?

SMITH:

This answer to this question can be addressed on so many levels, economic, cultural, social, it is hard to answer without writing a ‘book.’ First, though, yes, of course Rick has a point. All is not daisies in Great Falls, and any citizen is entitled to comment on it. Most of us have real lives where people depend on us, so we cannot go to the City and County Commission meetings every week to keep up with what these folks are doing. (Which, as an aside, is one of the reasons for this blog.)

I was a little taken aback by his response to my suggestion, though, that some of the naysayers complaining about the lack of economic activity make some of their own. As someone who has borrowed money (lots of it) to stir up some economic activity with the hope that there will be some left for me every month, I am a little bit resentful of the people who complain about the lack of good restaurants, etc. If you want a different restaurant, no one is stopping you from opening one. If  you think there are too many casinos or gas stations, then open something else!

But my column that started this discussion, though, was not intended to poke at Rick Tryon, a fellow I like. Instead, it addressed, and this response will address, the general attitude of inferiority in this town.

You stated that some “point to a lack of high-paying jobs, low population growth, and drug abuse as significant community problems.” I agree that these are community problems, but I also think that my fellow Great Fallsians(!) tend to focus on these things more than people in other communities.

I remember a few years ago I was at a planning session for a local charity board I was serving on at the time. We had a facilitator come in from Missoula. When we were asked to brainstorm about how Great Falls is perceived, someone shouted out, “Meth Capitol of Montana!”

The facilitator stopped, cocked her head, and said, “Really? I would have that that was Kalispell and the Flathead Valley.”

My point is this: Yes, Great Falls has problems. Yes, other communities grow faster, or have a Costco or a Chic-Fil-A.

But I think that Great Falls is different from other Montana communities in that we have a really high percentage of our population, including at the more active levels of business and government, who often walk around like Eyore, complaining that we’re not Missoula. This matters, because other people from other places who interact with us absorb this as the face or character of our community. When you meet a Missoula family whose kids are here playing in a basketball tournament with your kids, and you put down your own town, that fuels their perception of our town too.

I can’t explain it. But it has been this way almost as long as I can remember, and that dates at least into the 80’s.

I like it here. Yes, there are problems. But there are a lot of good people in this community, and not everyone who makes a buck is a “crony” or a part of the “old boy network.” Putting people down does not make them more inclined to work with you.

I think if we can improve our residents’ perception of this town, this is an important first step in improving the town itself.

TRYON:

Gregg, just to reiterate my earlier point – anyone and everyone who works hard and pays the taxes that pay the bills in this town has every right to voice their concerns about our economic and jobs situation. And they should be able to do so in any forum they choose without fear of being labeled a ‘naysayer’ or a ‘negative nanny’. It’s not just the folks who take risks to open casinos and restaurants who create economic activity; it’s also the people who spend their hard earned money around town and who pay the taxes for the streets and utilities and the jobs for city employees, who create economic activity. So, yeah, those folks should be listened to and their opinions respected, not brushed aside as Eeyore clones.

When I hear local Great Fallsians (Great Fallsites?, Great Fallsters?) say they wish that “they would open a Red Lobster here,” I think what they’re really saying is, “I wish our local economy was such that we could support a Red Lobster or Olive Garden.”

We both know that opening an Olive Garden or Chic-Fil-A is not the answer to economic development in Great Falls. Chain and franchise operations like that are the result, not the cause, of true economic development. And I love me some Chic-Fil-A spicy samich and curly fries!

We also both know that a casino/motel/gas station economy is a dead end. Only so much local money can be traded around. Right now it looks a little like a game of whack-a-mole around here – one restaurant closes and leaves an empty hole, another opens somewhere else. One casino goes belly up and another opens on the other side of town. By the way, just anecdotally and judging by the number of empty commercial buildings and office space I see around town, it looks like there’s more whack than mole lately.

Now having said all of that, believe it or not, I am extremely positive and upbeat about the future of Great Falls. We have enormous human and geographic potential here, being the center of the state, and having a hardworking, well-educated populace, for the most part. I remember that we were once a thriving, bustling, busy community with lots of stuff going on and we will be again, I’m certain. But to get there we have to be honest about where we are now and we have to have a common vision and goals.

I love this piece of God’s good dirt called Great Falls. I was raised here, raised my kids here and now my grandkids are being raised here. Four generations of my family live here right now, so I am staked inexorably to this community.

Let’s never mistake honest evaluation for negativity or the desire to see us live up to our potential as being “down on Great Falls”. I know you want the best for this town also, Gregg, so let’s agree to find the common ground and make it happen, my friend.

ECB: Most everyone agrees that Great Falls is a great place, but there always seem to be questions about the role of local government in economic development. Recently, the City Commission denied Calumet a large tax abatement request. Were they right to do so?

TRYON:

I admit I’m a little conflicted on this issue, but in the final analysis I have to agree with the City Planning and Community Development Department’s recommendation and the City Commission’s decision to deny Calumet’s request for a tax abatement in the wake of its expansion in Great Falls. Government, whether city, state or federal, doesn’t create jobs. The role of government in economic development is to create a jobs-friendly tax and regulatory environment, but to do so within the means of everyday taxpayers while still providing public infrastructure and services.

Calumet requested this tax benefit from the City at a time when we are still in fiscal recovery mode brought on by the disastrous Electric City Power boondoggle and a major national recession. The loss of revenue to the City of Great Falls, had Calumet been given the tax abatement, would have been unfair to local homeowners, small business and other taxpayers, who are already being hit repeatedly with tax increases and raised City service charges and fees.

The estimated cost to the City in lost tax revenue over 10 years would have been $6,345,185. For the school district the figure is an additional $6,222,143, and for the county it’s $4,930,365.

Tax benefits for companies providing good paying jobs is a good idea and the tax abatement tool is a powerful one. Certainly the Calumet expansion is a positive thing for Great Falls, providing 40 new full time, good paying refinery jobs. This is why, as I mentioned, I am conflicted about this issue.

In my opinion, the tax abatement tool should be reserved for bringing in new development and jobs rather than rewarding an expansion of an existing enterprise. Even then we should be very careful in making sure we’re not “giving away the store” and passing on the cost of additional city infrastructure and services to local taxpayers. Quite frankly, I’m hearing from friends and family that they are starting to feel like their homes and small businesses are being treated like ATM machines to fund local government.

One of the many factors to be considered when assessing this issue is well-stated on page 6 in the staff recommendations submitted to the City Commission for consideration:

However, Calumet’s expansion has an impact on public safety, planning, training, and response that cannot be specifically quantified, but cannot be ignored. 

There will also be operational impact to the City’s Waste Water Treatment Plant and discharge regulation in terms of compliance monitoring, permitting and treatment as Calumet’s processing capacity increases as a result of the expansion.”

I think we should be very cautious in using our taxing tools for job creation here. We should be focusing on growing our population and raising income levels by examining and re-doing our city/county regulatory environment and policies first. A subject for further discussion I hope. That and the topic of TIF’s going to local good ol’ boys to develop more huckleberry syrup shops, casinos, and motels which pay minimum wages to part-time employees.

SMITH:

I am going to have to confess ignorance here, because like many issues in this community it was not well-publicized in advance (hopefully E-City Beat can change that!), and then when the Tribune did cover it after the fact, the coverage was so bad that I couldn’t make heads nor tails of what actually happened. Therefore, I am going to have to default to some general principles here.

First, in a free market economy, the government has no role in subsidizing any private enterprise. Government should be doing what government does, i.e., streets, police, armies, and keep its nose out of the marketplace. Of course, that model has been irretrievably altered in the United States as virtually every municipality, county, state, etc., offers tax and other incentives to businesses to locate there. Thus, we have to play the game if we want development.

Second, I think Rick raises a good point that, perhaps, the City’s budget is still tight because of the Electric City Power fiasco. If that is true, it sure isn’t being reported. And if that is true, it’s a damn shame. It’s an example of city government hindering, rather than helping, development.

Because you can be sure this decision will hinder development decisions, at least from Calumet, and quite possibly from other large companies who are thinking of expanding into the Great Falls market. ‘Word on the street’ is that Calumet feels betrayed, and that Calumet’s management had every reason to believe this abatement was going to be granted. (I’ve also heard rumor that all charitable contributions in Great Falls by Calumet stop now.)

Rick points out that some people get breaks and some people don’t. Welcome to Great Falls (or, should I say, small town America?).

I think the City was wrong to deny the tax abatement, while admitting I do not know all the details that could change my mind. The best way I have to look at it is prospectively. If a company in Great Falls, any company, came to the City Commission and said, “We are going to invest nearly half a billion dollars in your community, and create at least 40 permanent jobs paying $30,000.00 a year, if you will give us a $600,000.00 a year break on our taxes for just 10 years,” would we take that? Or, as many in the business community suspect, does the City just view a new or expanding business as a revenue source? What can you do for me?

COMING NEXT WEEK: PART II…

Great Falls Landlords Oppose NeighborWorks Project

ECB Staff on January 20, 2017

This week, the Great Falls Landlords Association unanimously opposed a measure that would grant NeighborWorks Great Falls assistance from the Montana Board of Housing for its proposed Rockcress Commons development, a 124-unit apartment complex to be built south of Great Falls College-MSU. Local and state chapter President Ricky Linafelter submitted a letter to the Board, urging its members to deny funding for the project.

Linafelter argued that Great Falls no longer faces a housing shortage, and that the current rental market is tough on landlords:

There was a survey done approximately two years ago concerning the shortage of housing in the Great Falls area. When this survey was done, the shortage of housing was due, in part, to the extra short-term workers in town revamping the refinery.  This project has since been completed.  We now feel that there is an ample amount of housing available.  I, myself, have 6 units of my 24 units vacant at this time.  I surveyed the members at the meeting last night, and the majority of them have vacancies.  The estate of my previous vice-president, who passed away last month, has 5 units of the 20 units vacant.  I had one other landlord tell me he has 16 vacancies at this time.

The landlords also took issue with the prospect of NeighborWorks’ partner in the project, GMD Development, a for-profit company from Seattle, drawing income in Montana and receiving Montana grant money, while not contributing sufficiently to our state’s economy:

We do not feel that Montana grant money should be given to an out-of-state for-profit company. Furthermore, we do not feel that on out-of-state company should be able to acquire income generating property in Montana and not be required to pay property taxes as required by Montana residential property owners.  In addition, we do not feel that an out-of-state company should benefit from money collected as Montana rental income and spend that money outside of Montana.  This project will result in an out-of-state company benefitting from rental income generated in Montana without requiring that company to contribute to sustain Montana’s economy.

Read the letter in its entirety here.

Will Patrella’s Successor Embrace The Park And Rec Master Plan?

ECB Staff on January 12, 2017

In November, 2016, the City Commission voted unanimously to adopt the Park and Rec Master Plan. Less than two months later (and not because of this), Director Joe Patrella resigned his position for a job in Arizona.

With the search to succeed Patrella still ongoing, important questions persist for the City, and for its taxpayers.

The Master Plan, conceived by Indiana-based PROS Consulting, recommends much in its 176 pages. Primarily, it identifies $12,614,160 in “critical” capital improvement programs — “Maintaining What We Have.” Among the expenditures are $102,575 for the Americans Little League Complex, $114,010 for Boston Heights Park, $1,020,000 for “Charles Russel [sic] Park,” and $2,935,000 for Gibson Park, among many others (p. 140).

PROS Consulting also details $1.15 million in “sustainable” capital improvements — “Improving What We Have.” The consultants suggested the City spend $100,000 to convert six tennis courts to pickle ball courts (pickle ball?), $500,000 to add five large picnic shelters at Gibson, Grande Vista, Jaycee, and Meadowlark Parks, $150,000 for two more dog parks, and $400,000 for additional master plans (p. 141).

The plan also solves the long-standing community riddle of the City’s failing indoor aquatics program: build a 50,000 square foot “Multi-Generational Center that replaces the existing Recreation Center and Moronoy [sic] Natatorium” (for over $20 million). As for golf, the second and final line-item under the plan’s “Visionary Recommendations” (p. 142) reads: “Re-Master Plan Anaconda Hill [sic] Golf Course and convert Campground/Adventure Area through private public partnership.” In other words, shut down Anaconda and convert it into a zip-line/ropes course/BMX course/campground. The cost of this “re-mastering?” “Only” a quarter of a million dollars.

And how might the City pay for all of this, you might ask? By implementing a City-wide Parks Maintenance District. In other words, by raising taxes.

Mike Svetz of the aforementioned consulting firm pointed to Billings, which implemented a parks district a few years ago. Under its model, Billings households chip in about $6/month. With Great Falls’ comparatively smaller population but higher expenses, residents could see $15-20/month assessments per household… just for the parks district. In addition to this extra assessment, and to construct a multi-purpose structure to replace the Nat and the Community Rec Center, Svetz & Co. recommended a tax levy bond that could last for up to 15 years. The numbers start to add up quickly.

master plan

Master Plan: $34 Million To Upgrade Great Falls’ Parks

Now, to be fair, the Master Plan is “not a work order,” as the Tribune pointed out. It’s a guide to direct City priorities moving forward. But it does raise some important questions: Will Patrella’s replacement embrace the Master Plan, and will the Commission enact its central recommendations? And if not, then why? The City spent $89,970 on this document.

What do you think? Did the consultants get it right?

(The featured image is attributable to Xnatedawgx under the Creative Commons Attribution-ShareAlike 3.0 Unported License. Image was slightly cropped.)