- Associated Press - Tuesday, July 28, 2015

July 28—A giant decline in demand for toilet paper and paperboard might result in a reduction of Clearwater Paper’s assessed value in Nez Perce County after the company finishes a proposed $160 million project.

That remote, worst-case scenario surfaced Monday as Nez Perce County commissioners brainstormed how to structure a tax exemption for Clearwater Paper so it would only apply to a more likely outcome of the Lewiston plant gaining value with the upgrade.

The county could specify the exemption would be valid on an increase in property tax revenue at Clearwater Paper, said Commissioner Bob Tippett.

The commissioners made no formal decisions Monday. Today, they are scheduled to tour the site where company officials are considering construction of a new chip pulp digester.

Clearwater Paper wants a 75 percent exemption on the new property taxes the investment would generate in the first five years after it’s finished. The estimated value of the exemption has previously been stated as $4.2 million in comparison to the $3.36 million in annual property taxes for the company’s Lewiston operations in 2014.

Construction is anticipated to take three years. Clearwater Paper would like to maintain its right to appeal its assessed value while the exemption is in place.

The plant is expected to be worth more and generate new tax dollars if Clearwater Paper, one of Nez Perce County’s largest employers, moves forward with its plans. The new chip pulp digester would replace equipment that is decades old, be more efficient and be responsible for a net reduction of greenhouse gas emissions.

However, an anticipated rise in assessed value and tax revenue might not materialize, partly because of how Clearwater Paper is assessed.

The company has proposed using a bricks-and-mortar assessment method for the upgrade during construction, then switching to the discounted cash flow method when it starts using its new facility.

About 10 years ago, when the company was a part of Potlatch Corp., it appealed its assessed value and the county started using the discounted cash flow method for the existing facility, said Assessor Dan Anderson.

The discounted cash flow approach attempts to measure income stream, not the value of bricks and mortar, by using a calculation that involves factors such as the cost of sales, gross profit, taxable income, income taxes, net income, depreciation and capital expenditures. The method is often used for factories because investors make their money based on the ability of an operation to turn a profit, not how nice its buildings are, Anderson said.

So unless the county is careful, Clearwater Paper might receive an exemption when its contribution to the tax base had decreased if it encountered unforeseen financial troubles.

Company officials didn’t attend the meeting Monday. But in an email, spokesman Matt Van Vleet said that if the assessed value of the upgrade dropped to less than what it was at the end of construction, the value of the 75 percent exemption would be zero.

A decision about the exemption is one of three steps that need to be completed before Clearwater Paper’s management makes a final decision about the project. It also needs to complete engineering and get the go-ahead from the Idaho Department of Environmental Quality.

Williams may be contacted at [email protected] or (208) 848-2261.

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(c)2015 the Lewiston Tribune (Lewiston, Idaho)

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