Settlement reached in GP tax case in which Oregon's Clatsop County, taxing districts will pay GP US$2.5M in property tax refund; case involves challenges filed by GP against 2008 tax penalty, tax assessment on part of its Wauna pulp and paper mill
May 16, 2012
– Clatsop County and the owner of the Wauna pulp and paper mill have reached a settlement over the company’s tax challenge.
The county and 60 other taxing districts will pay Georgia-Pacific a total of $2.5 million in property tax refund.
The case involves challenges filed by Georgia-Pacific against a 2008 tax penalty and the tax assessment on part of its Wauna facility.
The settlement ends a four-year legal struggle that had the potential to hit local cities, schools and other taxing bodies with a significantly larger bill. Along with the payment, the settlement also establishes a real market value for the Wauna mill that Georgia-Pacific cannot appeal for the next five years.
The county informed the other taxing districts of the settlement by letter this week.
The payment will be paid off with a 10-year loan or bond that county officials believe can be secured with an interest rate of less than 3 percent. Clatsop County’s share of the payment, including loan costs and interest, would total $375,544. Other districts’ shares would range from approximately $1 to $653,300 – annual payments on those shares will be deducted from the districts’ yearly property tax disbursements, under the terms of an intergovernmental agreement that was signed by all the districts in 2009 in anticipation of a refund payment.
The county will host a meeting next week for representatives of the affected taxing districts to explain the settlement and payment plan.
The case dates to 2004, when Georgia-Pacific was granted tax exemptions under the Lower Columbia Maritime Enterprise Zone for construction of its new No. 6 paper-making machine. Under the exemption, property taxes assessed on the new machine were to be waived for five years.
In 2007 the company was disqualified from the exemption program for failing to maintain a minimum required number of employees at the mill site. As a result of the disqualification, the company had to repay the exempted taxes, totaling approximately $4.1 million. That money was distributed among the 60 taxing districts.
Georgia-Pacific filed an appeal in Oregon Tax Court challenging not only the exemption penalty but also the assessed valuation of the entire mill for three tax years. The appeal claimed that the assessment, on which Wauna’s annual property tax bill is calculated, overvalued the mill by approximately $154 million.
Tax assessments of large industrial properties like Wauna Mill are conducted for counties by the Oregon Department of Revenue, which joined Clatsop County in fighting the appeal.
In 2010 Tax Court Judge Henry Breithaupt ruled that Georgia-Pacific could only challenge the tax assessment on the new paper machine for 2004 and 2005, and the assessment on the mill as a whole only for 2007, which significantly reduced the scope of the company’s claim. On May 1 the county, along with the state Department of Revenue and Department of Justice, reached agreement with Georgia-Pacific on the terms of a settlement.
Along with the payment, the settlement establishes the real market value for the mill of $291 million.
Under Georgia-Pacific’s claim, Clatsop County and the other districts could have been required to refund more than $11 million if the company had prevailed on all appeals at trial.
State statute mandates that all of the 60 taxing districts in Clatsop County are liable for a portion of the settlement, regardless of whether Wauna Mill lies within their boundaries.
Wauna pays a total of $3,410,536 a year in property taxes to taxing entities in Clatsop County, making it by far the county’s biggest single taxpayer.