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Lawmakers eye tax break extension for state's last 2 aluminum plants

The extension includes provisions for payback if the facilities at Ferndale and Wenatchee are closed.
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Rep. Vincent Buys

The extension includes provisions for payback if the facilities at Ferndale and Wenatchee are closed.

In the 1980s, Washington had 10 aluminum smelting plants employing roughly 10,000 people. Today, the state has two Alcoa plants in Ferndale and Wenatchee that employ about 1,100 people between them.

Managers and workers from the two Alcoa plants — plus representatives of the Ferndale and Wenatchee chambers of commerce — pleaded Tuesday for the House Technology & Economic Development Committee to recommend that tax break extensions be green lighted for the two plants. Rep. Vincent Buys, R-Lynden, introduced the bill.

The bill is a fairly standard extension of a tax break, although with some new wrinkles. The Legislature has become more rigorous about putting job-related targets and so-called "clawbacks" in tax exemption legislation.

A clawback is essentially a provision requiring that a company refund its tax break money to the state under certain conditions, such as closing a facility or cutting jobs. Legislators’ use of the requirement has arisen largely in response to their granting of huge tax breaks to Boeing only to have the corporation send away jobs that were not specifically covered by the language in tax exemptions. Many lawmakers are particularly bitter about Boeing’s getting $9.7 billion in tax breaks through 2040 to keep 777x production in Washington, but then shipping a huge number of engineering jobs out of state.

Under this bill, if a plant closes, then Alcoa would have to refund the amount of the tax exemptions for that year, plus for the two previous years. Because of the limited number of smelters in the state, the total amount of their tax breaks is considered proprietary company information. 

Alcoa employs 625 people with an annual payroll of $60 million at its Ferndale smelter. Its Wenatchee facility employs 465 with annual payroll of $53 million. The average worker's annual salary and benefits are about $108,000. Ann Cline, executive director of the Ferndale Chamber of Commerce, noted Boeing, in order to get its tax breaks, routinely points to the huge economic ripple effects that would occur from moving tens of thousands of jobs out of Washington. "On a smaller scale, that’s the exact same thing for us," she said.

Alcoa officials, workers and chamber officials testified to Alcoa's close ties with the two communities that stretch back several decades.

In 2004, rising prices for power plagued the state's aluminum industry, which uses huge amounts of electricity in its smelting. Consequently, the Legislature granted the industry business-and-occupation tax reductions plus a sales tax break. These exemptions have since been extended to 2017. While power rates have dropped, cheap aluminum out of China has hurt the two Washington facilities, which need help to cope with global competition, Alcoa official Ryan Spiller told the committee.

Consequently, Buys' bill seeks to extend that tax breaks to 2022, with the bipartisan Joint Legislative Audit & Review Committee reviewing the effectiveness of those exemptions in 2020. The audit committee will examine the number of employees and their wages -- along with changes in worldwide aluminum prices and the Bonneville Power Administration's power prices for electricity supplied to the plants.

  

About the Authors & Contributors

John Stang

John Stang is a freelance writer who often covers state government. He can be followed on Twitter: @johnstang_8