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Depletion tax increase would hurt the local economy

Mr. Wayne Mayo has proposed a simple remedy for Columbia County government’s revenue shortage: a 400-plus percent increase in the depletion tax on aggregate. As is often the case when simplistic solutions are offered for complicated problems, it’s wrong. Columbia County voters seem to agree. They defeated a similar proposal in 2005 by an overwhelming margin.

As much as 80 percent of the aggregate produced in Columbia County is sold in the regional market for concrete, asphalt and base rock in public and private construction projects and infrastructure maintenance that are let by competitive bid. Successful bids are often a matter of pennies per ton.

As any contractor in a high-volume, small-margin and fiercely competitive business should know, increases in overhead drastically affect your ability to be successful, especially when you pay and your competitors don’t. You can’t simply pass along a tax increase in a competitive-bid environment.

The Spotlight reported that Columbia County collected approximately $328,500 in depletion taxes in 2012. According to the Land Development Services Department, that figure was approximately $462,000 in 2013. The difference is largely due to one project: the new FAB building at Intel. A 65-cent increase per ton on the depletion tax absolutely would have made a difference in how that contract was bid and awarded. Mr. Mayo appears willing to risk crippling a local industry that has been a major factor in our economy for decades.

According to the Spotlight, “Mayo scoffs at the idea that mining companies would cut jobs in Columbia County if the depletion fee goes up.” Mr. Mayo is, at best, naïve. A drastic increase in the depletion fee would result in lost contracts, which would result in less production, which would result in lost jobs and lost local tax revenues. It’s Economics 101. Those lost jobs would not be confined to aggregate producers. Truckers, fuel companies, equipment suppliers and dozens of small local firms that provide parts and services to aggregate facilities would suffer.

Columbia County does not have a corner on the rock market. Figures compiled by the Department of Geology and Mineral Industries (DOGAMI) indicate that Columbia County producers provide only 20 percent of the aggregate consumed in the Portland metropolitan area. Columbia County competes with resources in Multnomah, Clackamas, Washington and Marion counties, and even material barged down the Columbia River from Klickitat County, Washington. None of those jurisdictions singles out aggregate for a special tax, as Columbia County does.

Mr. Mayo reports that Alaska successfully charges a depletion tax on aggregate. Mr. Mayo is wrong. Alaska charges a royalty for material extracted from state-owned land. So does Oregon. When the Mist gas fields were active, Columbia County collected royalties for natural gas wells on county land. However, that is a far cry from taxing a private company for the privilege of mining its own private property.

Mr. Mayo’s 400 percent depletion tax increase will have the opposite effect than the one he intended. It will impair Columbia County aggregate producers’ ability to compete in the regional market, which will decrease production and employment, damage the local economy and cause the county’s tax revenues to decline rather than increase.

Before his retirement in 2012, Bob Short was the public affairs manager for CalPortland, which operates the Santosh aggregate facility outside Scappoose. He is a past chairman of the board of the Oregon Concrete and Aggregate Producers’ Association, and currently serves on the Columbia County Economic Team.

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