House Finance Committee talks tax breaks

MOSES LAKE - State lawmakers are continuing the conversation on tax incentives that would benefit some of the area's data centers and food processors, topics that could come up in the form of bills during the next legislative session.

Members of the House Finance Committee held a work session in Moses Lake last week to hear from representatives of both industries about the need to extend existing tax breaks that are set to expire next summer.

One would extend the expiration of sales and use tax exemptions from 2015 to 2025 on purchases of certain server equipment and power improvements for new data centers. The extension was outlined in a bill brought up in the Senate in February, according to a previous Columbia Basin Herald article.

Senate Bill 6550 was approved by the Senate, but did not make it to vote in the House before the end of session.

The other tax break would benefit seafood, dairy and fruit and vegetable processors by pushing back the July 2015 end date on business and occupation tax exemptions. If no legislative action is taken, a B&O tax preferential rate of 0.138 percent would go into effect.

Last week's meeting was the culmination of the committee's trip to Grant County. They spent the previous day visiting data centers and food processing plants in Quincy.

Stops included ConAgra, Quincy Foods, Yahoo! and Microsoft.

Port of Quincy spokesperson Pat Boss said it was a big deal to have them visit the area.

"This is a prelude to the upcoming session, the House is trying to go out and get a feel for what the locals are thinking and what the local companies want," he said. "These issues have a lot of impact in rural areas, both would have tremendous impact on places like Moses Lake, Quincy, Othello and both are going to be coming up for consideration."

Boss said both tax exemptions, if continued, would help the state remain competitive in getting new businesses to build here. When companies are going through a site selection process, one of the things they look at is what tax incentives a certain state has to offer, he said.

"Other states like Oregon have more consistent and better tax incentives in place than we do and in order to compete with them we need to get our tax incentives back in place," Boss said. "When companies look for sites it's a global competition and we have to be competitive which is why these types of incentives are so important."

Boss mentioned Washington losing to neighboring states on a few data center projects as a result of not having tax incentives in place during the work session. He told legislators companies such as Amazon and Facebook had considered sites in Grant County, but decided to build facilities in other states when the state did not have its tax incentives in place.

A 2010 bill provided a sales and use tax exemption for new or expanding data centers, provided the work occurred between March 31, 2010 to July 2011.

In June of 2011 a bill that would have extended that tax break for data centers died in the House during the final week of the Legislature's special session. However, legislators passed a new bill the following year that reinstated the tax incentives until July 2015.

Boss told legislators it is highly likely that at least two or three major data center projects would begin construction in the county next year were action taken on extending the tax breaks.

Quincy mayor Jim Hemberry also spoke during the work session. He addressed the impact taxes, such as property, payroll and public utility taxes, data centers pay have on the city's school district, hospital district and other units.

A fiscal note prepared by the state Department of Revenue estimates a reduction in state tax revenues of $18.2 million between 2015 and 2017. When Hemberry testified in favor of Senate Bill 6550 earlier this year, he said the increase in local property and other tax revenues would compensate for it.

He restated that sentiment last week.

"I know many people think these large data centers are not paying their fair share of taxes," he said during the work session. "I argue they pay more than their fair share of taxes."

Hemberry said, for example, data centers would end up covering a big chunk of a proposed $2.2 million hospital levy.

"If passed, data centers would pay more than half of that cost, effectively lowering the cost for everyone else," he said.

Food Processing

Proponents of extending B&O tax breaks for dairy, seafood and fruit and vegetable processors also spoke with legislators about how important the tax breaks were to their industry.

Ian Tolleson, director of government affairs for the Northwest Food Processors Association, said industry members will have to pay billions more in taxes if the exemptions weren't extended.

Fruit and vegetable processors would be expected to pay an additional $3.6 billion in taxes, and that would come with an output reduction of $1.4 million. Dairy processors would pay about $565,000 more and seafood companies would pay about $1.2 million more than they already do, he said.

"This tax exemption, this tax preference is very important to our food processing industry," said Tolleson.

He also mentioned the state could lose to other states on new projects as a result of no tax exemption.

"The question is, where is the investment going to happen," he said. "Are food processors going to be in Washington or are they going to go across the border to Idaho or Oregon, it's really up to the legislature to say we're open for business and we're going to help you."