Hynix's double windfall.
When Eugene City councilors were debating a compromise proposal earlier this year to give Hynix a $2.2 million property tax break, they were unaware that the computer chip maker had already appealed its property taxes to the Oregon Tax Court. The two issues ought to be unrelated, but they're not - and the resulting muddle of suspicions and resentments underlines the need for a cut-and-dried process for granting tax breaks.
Every property owner has the right to appeal tax appraisals, and thousands exercise this right each year. Given the high stakes and the difficulty of determining the taxable value of high-tech industrial property, it would be surprising if Hynix refrained from appealing the state Department of Revenue's appraisal of its west Eugene plant. The state placed a value of $748.5 million on the plant. Hynix claimed an accurate appraisal would be $500 million.
Hynix got most of what it wanted last Tuesday, when the tax court reduced the plant's taxable value to $566.7 million and ordered that overpaid taxes of $1.77 million, plus interest, be refunded. Seventy-five local governments in Lane County will have to come up with the money, and can expect smaller property tax checks from Hynix in the future.
Hynix appealed the revenue department's appraisal last December. The appeal was under way two months later, when the Eugene City Council approved $2.2 million in additional property tax waivers for the company.
Some council members are angry that they weren't told of the appeal during their deliberations of the waiver. They have a right to be. Information affecting one of the city's largest tax accounts is important in itself, and was especially relevant in the context of the council's discussion of tax waivers.
City staff members were aware of the appeal - but appeals of industrial property appraisals are common, and the magnitude of the court-ordered refunds was not foreseen. Still, staff members should not leave councilors feeling that they'd been kept in the dark. Information about the appeal should have been provided, giving councilors a chance to decide whether the appeal had any bearing on the waivers.
There is, however, a troubling implication here: that a company may endanger its application for tax waivers by exercising its right to contest an appraisal. Hynix claimed its plant was overvalued for tax purposes, and the Oregon Tax Court has agreed. A company's eligibility for tax waivers should not require that it accept what it considers to be an incorrect valuation by the Department of Revenue.
The two issues - the appeal and the waivers - ought to be unrelated. The problem arises when the council is given the discretion to grant or deny tax waivers based on any number of factors, including whether an appeal is in progress. Decisions on tax waivers then become a matter of subjective judgment, and property tax payers can win or lose valuable benefits based on whether they're liked or disliked by a majority of council members.
If tax waivers are to be granted at all, Eugene and other jurisdictions need objective standards for determining who qualifies. Such policies exist to a great extent, spelling out such things as where a company must locate and how many people it must employ before receiving tax breaks. But Hynix's $2.2 million waiver involved council discretion to such a degree that its fate might have been altered had members known of the company's tax court appeal.
The rules should be set forth in black and white, so that any applicant for waivers will know what must be done to obtain approval, and government officials can judge each case by a uniform standard.
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|Title Annotation:||Discretionary tax breaks are the problem; Editorials|
|Publication:||The Register-Guard (Eugene, OR)|
|Date:||Jun 9, 2002|
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