Clatsop County and the owner of the Wauna Mill have reached a tentative settlement in their four-year tax dispute.

The settlement will cost the county and about 60 other taxing districts a total of $2.5 million in property tax refunds.

Mike Robison, director of the county’s central services, called the tax settlement the largest in memory. The county’s share of the refund, including loan costs and interest, will total $375,544.

The refund will likely be paid off using a 10-year bank-qualified loan or bond, Robison said.

The county’s financial adviser has told the county that a loan could be secured with an interest rate of less than 3 percent. Doing so would allow the county and other taxing districts to pay off the loan in one lump sum, while costing the county about $37,000 annually over a 10-year payback period.

“We should be able to navigate that without a sizable impact to the county’s financials,” Robison said.

As a result of the settlement, the Oregon Department of Revenue has also reset the real

market value of the property is now $291 million, the county says.

Other districts would be on the hook for the remainder of the refund, and it could cost them hundreds of thousands of dollars.

Refund shares will range from approximately $1 to more than $600,000, county officials say. The terms of the annual payments on those shares will be deducted from the districts’ yearly property tax disbursements under the terms of an intergovernmental agreement that was signed by all the districts in 2009 in anticipation of a refund payment.

The county won’t be the only taxing district dispensing refunds.

Seaside School District actually owes the mill the largest amount in back taxes, about $653,300. Other taxing districts that will be heavily affected include the the cities of Astoria and Seaside, which owe about $210,000 and $160,000 respectively. Clatsop Community College is on the hook for around $200,000, Robison said.

Each district will have 10 years to pay off the amount.

The settlement is expected to save the county and its taxing districts money in the long run. That’s because county officials had anticipated the cost of going to trial to be upwards of $11 million, according to a letter sent to the taxing districts Monday, notifying the districts of the settlement. The county will again meet with taxing districts May 24 to further discuss the terms of the settlement.

Those discussions will come after a Wednesday evening meeting of the Clatsop County Board of Commissioners, at which commissioners are expected to sign off on the first reading of an ordinance approving the issuance of a bond. With that first reading, the county will set in motion a process that could see bonds issued as early as July.

Background

The tax settlement stems from a dispute between the county and the mill’s owner, Georgia-Pacific, in the wake of a failed attempt by the mill to receive tax abatements nearly a decade ago.

In 2004, the mill successfully became part of the Lower Columbia Maritime Enterprise Zone. Following that designation, the mill constructed its new No. 6 paper-making machine. Under the state’s enterprise zone tax exemption rules, property taxes assessed on the new machine were to be waived for five years.

The exemption also came with various employment requirements the mill couldn’t live up to. Namely, Georgia-Pacific was required to add jobs at the entire mill site.

But after a couple of years, the pulp and paper industry saw a steep decline in revenue, and the mill’s older No. 4 paper-making machine, was shut down. Jobs at the mill were lost through attrition and the mill no longer met the state’s employment requirements for enterprise zone designees.

Because employment numbers dipped at the mill, it was disqualified from the enterprise zone and Georgia-Pacific was told to repay $4.1 million in back taxes.

In 2008, Georgia-Pacific claimed the Oregon Department of Revenue, which is the agency tasked with evaluating large-scale industrial properties and setting their tax rates, had in fact overvalued the Wauna Mill by about $154 million and levied an unfair tax exemption penalty against it.

Tax Court Judge Henry Breithaupt significantly reduced the scope of Georgia-Pacific’s claim two years later.

He ruled that Georgia-Pacific could only challenge the tax assessment on the new paper machine for 2004 and 2005, and the assessment on the mill as a whole only for 2007, the year the mill shut down the No. 4 paper-making machine and lost employees.

Kristi Ward, a spokeswoman for the Wauna Mill, called the settlement a welcomed conclusion to a long and sometimes confusing story. She said the mill wants to use its money to reinvest into the workforce.

“Like most taxpayers, we want to pay our fair share in taxes to the state and county based on a correctly valued assessment, and at the same time use as much of the revenue we generate as possible to invest back in our business,” Ward said.

She said the tax decision adds clarity to the mill’s financials moving forward. The Wauna Mill currently employs 950 people, 70 of whom were hired in 2011. Thirty-five percent of the mill’s employees reside in Clatsop County, the mill’s records show.

“The single most important way we benefit the community is by remaining competitive,” Ward said.

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