SSI Big Sky, LLC, doing business as Schnitzer-Billings (formerly Golden Recycling) has applied for a 10-year tax abatement on industrial equipment purchases.  There are several pieces of equipment and the total value is about $2 million.  The City offers a tax abatement program under three sections of state code and City resolutions. This application is under 15-24-1401 MCA and City Resolution No. 05-18376.  This program allows new or expanding industries to apply for tax abatements that equal 50% of the newly taxable value for five (5) years, with the abatement diminishing by 10% per year until 100% of the newly taxable property is fully taxable in the 10th and subsequent years.  This program requires a public hearing and a resolution outlining the City Council's approval, conditional approval or denial of the tax abatement.  The business has complied with all application requirements, a public hearing was advertised in the Billings Times on April 21st and May 5th and School District 2 was notified about the application.  Therefore, the item is ready for Council action. 

The City Council may:

• Approve the application.  The tax reduction could be as much as $12,600 per year during the first five (5) years of the abatement and a reduced amount thereafter.  This figure is calculated by using the applicant's estimate of the equipment's $2,000,000 market value, multiplied by the statutory 3% tax on business equipment and multiplied by the estimated 420 mills levied by the City and School District 2.  The business may apply to the County for abatement of the county's portion of the business equipment tax. 
• Conditionally approve the application.  Conditions would normally be ones that are directly related to the application and its processing, not to the equipment, the business operation or its land use.  Staff does not recommend any conditions because the applicant has complied with all of the requirements.
• Deny the application.  If this application is denied, the City and School District 2 levies on the new equipment will be deposited in the East Billings Urban Renewal Area/Tax Increment District (EBURD) and will be available for appropriation for district improvements.

There is no direct financial impact to the City if the Council approves the application.  The property is in the EBURD, so all taxes from higher taxable value go into the tax increment account for that district.  The taxing entities continue to receive funds from the property value base that was established when the Council created the district and for the 50% of the new value that is not subject to the abatement.  If 50% of the newly taxable value is exempt from taxation, the EBURD loses that portion of the potential increment, which equals the $12,600/ yr. that is cited above.  State law defines the allowable uses of tax increment funds, but the focus is on improving public infrastructure that will encourage additional private investment in the district.

Staff recommends that the City Council conduct a public hearing on the SSI Big Sky, LLC, dba Schnitzer-Billings tax abatement application and deny the request.