To the surprise of at least two Pima County supervisors, their board has veto power over whether Monsanto Co.’s greenhouse will get tax breaks from a proposed foreign trade zone designation.
For Monsanto to get the property tax breaks, it needs the federal government to designate its 155-acre, Avra Valley-area greenhouse site as part of a larger foreign trade zone in Pima County. For that to happen, all government agencies with taxing authority affected by the designation must send letters saying they don’t object, said Tim Truman, a spokesman for the International Trade Association, a division of the U.S. Commerce Department.
If Monsanto obtains an FTZ designation, Pima County could lose property tax revenue because the designation would reduce the company’s property tax burden by two-thirds. So far, two other entities that could be impacted by the Monsanto project, the Marana Unified School District and the Joint Technical Education District (JTED), have agreed to send in letters of non-objection. A fourth entity, Pima Community College, hasn’t.
Pima County supervisors are scheduled to vote on Feb. 21, after delaying a decision last November.
Truman’s statement was much firmer than one made Jan. 18 by a county official at a Monsanto public meeting. Patrick Cavanaugh, Pima County’s deputy economic director, at the time described the importance of the supervisors’ upcoming vote as “a great unknown.”
The need for letters of no objection is spelled out in a November 2016 document that Truman emailed to the Star last week. It says an FTZ applicant must submit copies of letters from “all affected parties” indicating that they support or don’t object to the proposal. The document is labeled “guidance,” a term that typically carries no force of law. But it also says the letters are required.
The document does offer a potential “out” for Monsanto. If the company agrees to pay taxing entities enough so they don’t lose money from the FTZ designation, they won’t need to send letters of no objection. Such an agreement is known as a PILOT, for payment in lieu of taxes.
So far, however, that waiver applies to only one of the four entities. JTED has approved a PILOT agreement to get as much money from Monsanto as it would have without the tax break.
The Marana school district has accepted a $500,000 donation from Monsanto, far less than its take under a PILOT agreement.
Monsanto spokeswoman Charly Lord said the company intends to enter an agreement with Pima Community College to not receive any tax benefits from the college.
County Administrator Chuck Huckelberry has proposed a PILOT agreement with Monsanto in which, for 10 years, the company would pay the difference between the taxes the county would have received without Monsanto’s FTZ tax break.
But the county would have to refund the difference if Monsanto met certain goals.
These include at least $90 million total investment, at least 50 full-time and part-time jobs, average annual wages of at least $44,000, employee health and dental insurance coverage and 401(k) plans. Because the refunds will take tax revenue from the county, it would still have to send the no objection letter.
Two Pima County supervisors said they were unaware that the county’s letter is legally required for Monsanto to get the designation. This requirement puts additional pressure on supervisors before deciding, said Supervisor Richard Elías, a Democrat who opposes the tax breaks for Monsanto, and Supervisor Steve Christy, a Republican who hasn’t taken a stand.
“If the FTZ designation is going to be determined positively or negatively by the Pima County board, it places much more importance or emphasis on the decision the board makes,” Christy said.
Until now, he added, “My feeling was that it was just rudimentary approval or disapproval and had no bearing on the status of Monsanto.”
Now, the board’s action “becomes more than a piece of the puzzle. It could have real impact,” Elías said.
Denial of the FTZ designation wouldn’t stop the greenhouse project, particularly since Monsanto already bought the land. The county lacks authority to do that. Monsanto spokeswoman Lord declined to say if the company would kill or reassess its plans for the greenhouse if the supervisors vote not to send a no-objection letter.
“We’re going to use the information we’ve gathered from these public listening sessions, what we’ve learned from farming groups in the area, input we’ve received from business leaders and the Chamber of Commerce along with what the board decides next month to make our final decision,” Lord said.
Cavanaugh, the county economic official, gave a more uncertain view of supervisors’ potential impact at the Jan. 18 public meeting.
He told the gathering the impact of an unfavorable supervisors’ vote was unknown, because the county has received only “guidance” from the feds and “no firm rules that we’ve been able to locate.”
Cavanaugh later said he made the comment because the November 2016 federal guidance doesn’t specify that an FTZ application would be rejected if all impacted taxing entities fail to send in the letters.
Although the document says the letters are required, “generally in regulations you have very specific direction as to what the outcome is,” he said. The document also doesn’t say what happens if two entities provide letters and two don’t, he said.
But when asked by the Star what would happen if one or more entities refused to send such letters, trade association spokesman Truman reaffirmed his earlier statement. He said the FTZ board, a federal entity that decides on such designations, “only processes applications that include letters of non-objection from all affected taxing entities.”
On Tuesday, Cavanaugh said he’s no longer unsure of what would happen if all four entities didn’t sign PILOT agreements or send in no-objection letters.
On that day, he had Deputy County Attorney Regina Nassen call Andrew McGilvray, executive director of the FTZ board in Washington, D.C. He learned that if some affected parties submit letters or PILOT agreements and others don’t, “The FTZ staff would not move the application forward for consideration at all,” Cavanaugh said.
On Wednesday, Huckelberry issued a memo saying the same thing: That if all affected entities don’t submit letters of no objection, “no property tax savings or FTZ benefit would be issued to the applicant.”
