Jobs bill for Cowlitz and Grant
counties heads to the governor’s desk

Takko’s legislation advances economic
development in Longview and Moses Lake

April 26, 2009

OLYMPIA – No, it’s not quite all partisan wrangling, bickering and squabbling here in the state Legislature.

Every so often, bipartisan unity, teamwork and cooperation break out.

Three lawmakers representing different political parties and different geographical regions worked together this year to champion legislation aimed at boosting their local economies.

State Rep. Dean Takko, D-Longview, prime-sponsored the measure to safeguard family-wage jobs both in his own southwestern Washington region and in the Columbia Basin region of central Washington.

The legislation (House Bill 1062) removes an expiration date that’s looming for the public-utility-tax exemption for electrolytic processes.

“This important industry needs this tax exemption to keep folks working in good, family-wage jobs in our towns and communities,” Takko explained.

“For business facilities that take this public-utility-tax credit, electricity can account for 50 percent of their cost of operations,” he said. “You better believe this is a huge competitive issue for these companies that legitimately claim the credit.”

State Sens. Brian Hatfield, D-Raymond, and Janéa Holmquist, R-Moses Lake, steered the measure through the Senate. In fact, the original tax exemption for electrolytic processes was created back in 2004 in legislation backed by Holmquist, who was then a member of the House of Representatives.

“This tax break for businesses that basically use electricity as their raw materials is going to help keep nearly 200 family-wage jobs in Washington,” Hatfield said.

“We’re taking a long-term perspective in terms of working to recover our state’s economy,” added Hatfield. “The tax break isn’t a huge impact at the state level, but it’s a huge and invaluable impact to our local economies.”

Holmquist noted that “our economy is in a crisis – and families are in crisis.”

“Since the legislative session started in January,” Holmquist said, “we’ve seen unemployment skyrocket, and in February, it hit an 11-year high of 12.3 percent in Grant County. Given the current recession, the increasing unemployment, and the number of struggling employers, I have made preserving and creating new jobs my top priority in Olympia. This bill will help save local, family-wage jobs.

“Volatile energy costs are a major concern for local employers like Eka Chemicals,” Holmquist said. “Their competitors throughout the world receive these types of tax exemptions. These employers contribute a great deal to our local and regional economies, and they need our help. This small reduction in their energy costs will help them remain competitive, and help us protect these jobs and keep them here in our communities.”

Representatives from Equa-Chlor Marketing, LLC, which has a facility in Longview, and Eka Chemicals, which has a facility in Moses Lake, testified for the bill in legislative hearings earlier this year.

Equa-Chlor Marketing, LLC, engages in the manufacturing of chemicals and industrial gases such as chlorine, hydrogen, and caustic soda. Eka Chemicals is one of the world’s leading manufacturers of bleaching and performance chemicals for the pulp and paper industry.

These and other companies in the industry buy electricity at market rates, and it is a raw material for firms that use electrolytic processes to manufacture their products.

“This tax exemption is an investment that goes right back into our communities through the good-paying jobs for men and women who work in the industry,” Takko said.

The public-utility tax is a tax on public-service businesses, including businesses involved in transportation, communications, and the supply of electricity, natural gas, and water. The tax is paid on the gross income that is derived from operation of public and privately owned utilities in lieu of the business-and-occupation tax.

Current state law regarding the tax doesn’t allow deductions for costs of doing business, such as payments for raw materials and wages of employees.

But there are deductions and credits for some specific types of business activities, including wholesale sales and sales of electricity to direct-service industrial businesses.

A small number of large industrial manufacturers, mostly aluminum smelters, consume big amounts of electricity in their processing operations. These companies purchase their electricity directly from the Bonneville Power Administration and are known as direct-service-industrial customers.

Industrial chemical businesses also use significant amounts of electricity in their chemical-processing operations, and some of these companies buy their electricity from a local electric utility. The income to the utility from the sale of electricity to the chemical business is subject to the tax.

But there is an exemption for some electrolytic processes, such as the two businesses noted above. State law directs that income from sales of electricity by a utility to a chloralkali or sodium-chlorate chemical business is exempt from the tax, as long as the sales contract between the utility and the chemical business meets certain conditions:

* The electricity used in the chemical processing is separately metered from the electricity that is used in the general operation of the business.

* The price of the electricity used in the processing of the chemicals and charged to the chemical business is reduced by the amount of the tax exemption received by the selling utility.

The object of the tax exemption for electrolytic processing is to help the electrolytic-processing industries keep their doors open – and therefore keep people employed in these businesses.

Without this legislation, the tax exemption was set to expire in June 2011.

The bill passed the House, 91-4, and the Senate, 46-2, and now it’s going to the governor’s desk.