Wednesday, April 9, 2014

It's the Water Part One: Nippon Taxes the System

Despite the undeniable fact that Port Angeles is no longer a mill town, it’s also undeniable that a great many of the old guard here still cling to that identity. And we know that all of our so-called elected “leaders” are deathly afraid of seeming anything other than 110% pro-business at all times. With all that being so, Nippon – the Last Mill Standing – clearly has an outsize influence in Port Angeles. I would argue that that influence is generally malignant, or, at best, extremely self-serving.
Basic Fact: Nippon is a multinational corporation headquartered in Japan, despite Cherie Kidd’s seemingly unshakeable belief in them being “a local company.”
Background Fact: The City’s Utility Advisory Committee is very important when it comes to setting utility rates and policy. These decisions have a huge impact on both utility customers and the City’s overall finances. Nippon, for all intents and purposes, has two permanent seats on the UAC. No other business, local or not, has a presence on the UAC.
Background Fact: Related to the above…As the City’s largest utility customer, Nippon has historically paid hundreds of thousands of dollars a year to the City in utility taxes.
Background Fact: The City is debt-ridden, and strapped for cash, and likes the Nippon tax dollars very, very much. Utility tax dollars make their way into the City’s General Fund.
Background Fact: Nippon likes their dollars, too, and they have spent a great many of them on some very good lawyers. These lawyers have been very effective at challenging the local property tax assessments placed on Nippon. This is why, as their property has seemingly increased in value due to all the construction and upgrades, their property tax bills have actually been steadily declining.
Background Fact: Related to the above, for many years the Port was (and possibly still is) paying some of Nippon’s utility bills for the property they lease from the Port.
 
Think of it as a boon for doctors who treat asthma.
Background Fact: Nippon only ever started their biomass upgrade because A) The U.S. market for renewable (“green”) energy at that time was extremely strong and they smelled profits, and B) They had penciled it out in a way that had roughly half of the costs covered by U.S. tax breaks and other government giveaways.
 
Like a thief in the night, avoiding grief by taking flight...
 
Fact: The timing of Harold Norlund’s leaving Port Angeles was not random. Harold was the public face of Nippon for many years, and made many statements and promises on behalf of the company. Soon, many of those statements and promises will be exposed as lies, and Harold didn’t want to be here for that. Functionally it will work best for the company to have a new person introducing the new reality for Nippon in Port Angeles.
Fact: Since the biomass project has gotten underway, the U.S. market for renewable energy has fallen greatly, making it very doubtful that Nippon has found a buyer for any “green” energy the biomass facility will produce. (Remember: That’s why the biomass project in Port Townsend finally got stopped – the company realized there’s no market for the energy.)
Assumption: This being the case, it seems logical to assume that it is extremely likely that, sometime soon, Nippon will simply switch from buying electricity through the City and start using the electricity they produce to run their own plant.
Assumption: The last two years, Nippon has been challenging the City on the way they calculate Nippon’s utility taxes. This challenge resulted in the recent payout of $200,000 from the City to Nippon. It seems likely that this ongoing challenge will be part of the reason Nippon will give for switching to using their own power – they “just can’t afford” to pay the City all those pesky taxes.
Fact: If the above comes true in any way, it will result in the City suddenly and permanently losing hundreds of thousands of dollars a year in utility taxes. This loss, and the related loss of funds to the General Fund, will be crippling for the already threadbare City budget. Jobs, programs and services will be cut.
 

The bomb that will blow up the City budget is ticking...ticking...
 
Given all that, does it still make sense for the City Council to kowtow to Nippon? Do you think the Council members know some secret that makes this all go away and makes everything all right? Or are they whistling past the graveyard?
Put very simply, are you comfortable with the status quo? Or do you think the City could be doing a better job at being both proactive and protective?
Stay tuned for more on Nippon, coming soon…

36 comments:

  1. But I'm sure our forward-thinking and totally competent City Council is aware of this, and is taking steps to deal with it, right?

    Oops! I forgot I live in Port Angeles. Oh, crap! We're so screwed.

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  2. You've laid out the (continuing) destruction of our city and tax base quite nicely. Well done on your part. Not so well done on the part of the city itself.

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  3. I thought Coville's comments on Dale's site were pretty interesting. Basically, there are more people here than there are jobs, therefore, people need to move away and find jobs somewhere else.

    So, assuming he is right (and I have no reason to believe otherwise, given the empty sidewalks in town), and more people pack up and leave, how does this impact the city's budget?

    It seems that the civic leadership in Port Angeles have been so focused on the big players like Nippon, that they have lost sight of the everyday realities. Rather than putting time into facing the facts that the big corporate stores in Sequim were going to syphon off significant amounts of money from the Port Angeles area, they just ignored the whole topic, and did nothing. They did worse than nothing, and pointed to the Walmart in town to demonstrate big box stores have little negative effects on the Port Angeles economy.

    You may be right. Nippon may turn to using the electricity it creates. I don't know the economics of how much it costs to run the incinerator, with no buyer to offset costs. But, for how long will it be making telephone book paper?

    And, not discussed are the zero interest rates and literally billions of dollars the Japanese government is pumping into its' economy the keep it marginally afloat. Like the US, that also is pumping (now) $75 billion every month into the US economy to give the illusion that the economy is actually workling. Without those massive infusions of government money, the Depression would still be making headlines.

    But, here in Port Angeles, the Council just finds more ways to make us ever more fragile..

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    1. I like the way you put it, "make us ever more fragile." Fragile, vulnerable, at risk - call it what you like, but the people minding the store have done a truly terrible, terrible job from a fiscal perspective. They have also done a truly terrible job from a simple reality perspective.

      On one hand they praise and bow down to Nippon, and do everything they can to give them anything they want. (The recent $200,000 bonanza being just the latest example.) In return, Nippon keeps saying they're in such a precarious situation, they need more and more "help" just to make it. This sends the city and port and everyone else into a frenzy of passing the hat for poor ol' Nippon once again.

      But they don't seem to be really hearing what Nippon keeps saying, or taking them at their word. I do. They are making a product that there is a limited-and-shrinking demand for. They are doing so in an old facility in an out of the way location. Norlund would always speak in fairly gloomy terms about the outlook, and I believe him. It makes sense that this mill is at the end of its tether, biomass or no biomass.

      Maybe this is the (possibly unconscious) result of Nippon and Harold lying about so many things for so many years: The council hears these things, but doesn't believe them. Whatever the case, they sure haven't taken any steps that I know of to prepare for a Port Angeles without Nippon. Amazingly, they haven't even considered the possibility (as you point out, CK) of a Port Angeles without Nippon as a utility customer - EVEN THOUGH YOU LET THEM BUILD A POWER PLANT ON THE SHORELINE.

      Amazing. Truly amazing. Are these council people just brain dead, or are they on Nippon's payroll? Because none of this makes sense or adds up.

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    2. One of many, many ironies of this situation is how so many of the people defending and praising Nippon for it's all-out gorging on our tax dollars and government assistance are the very same people who rail against...handouts of tax dollars and government assistance.

      Call it what you like, though, but this is clearly corporate welfare. I just don't see what else to call it, or anything to justify it. Think about it: Do you really believe that the $40-50 million in tax dollars Nippon is getting handed to them will be equaled by them providing $40-50 million dollars worth of jobs? Will it add even $10 million dollars worth of quality of life to Port Angeles? I don't think it will. Not even close.

      But corporate welfare generally flies under a cloak of lies, with "jobs" and "economic development" being chief among them. Lies don't provide jobs. And we all lose out when corporate welfare flourishes, and when we have politicians so willing to dish it out. Sure, Cherie Kidd sucks up to Nippon locally, but Steve Tharinger is the one who did the dirty work to get the latest tax breaks for Nippon pushed through on the state level. Both Kidd and Tharinger are corporate pawns doing harm to the community - the only difference is a matter of scale.

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    3. You don't think that $75 billion a month the US government is putting into the economy is coming to the average person, do you? Talk about corporate welfare we're all being saddled with the bill for!!!

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  4. Given how prominent Nippon is and Harold was in the community, the fact that he left without warning, without announcing it ahead of time, does say something. If it wasn't bad news for Port Angeles, he would have given a heads up, they would have "feted" him, etc.

    But no, he ducked out suddenly. Now there's a new guy in his place. And yes, I expect there will be changes soon, which doesn't bode well for the community.

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    1. Yeah, Harold, why the big rush? Afraid of leaving town tarred and feathered?

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  5. Background Fact (not widely known, under appreciated, and conveniently overlooked by some):
    Because the Mill, (currently Nippon), has historically been the City's largest electric utility customer, just as posted, and requires significant power availability and huge monthly purchase volumes, it has also historically "bought down" the overall Bonneville wholesale power rate for all other PA electric utility rate payers. This is an easily available, historical fact. It accounts for the reason Port Angeles electricity rates are among the cheapest in the entire country.

    Admittedly, that may not make it worth living with a mill in town, but it does equate to cheaper power rates than anywhere else on the Olympic Peninsula.

    The only cheaper power available in the entire Pacific Northwest is near the hydro dams in Grand Coulee and/or Coulee City, WA. Check it out for yourself.

    Someday, when the Mill finally shuts down for good, and it eventually will, not only will PA lose hundreds more family wage jobs, but the Bonneville wholesale power rate purchase will depend entirely on average citizen and business residential and commercial power rate structures causing them both to increase dramatically. Not something to look forward to, but it might get our minds off skyrocketing sewer rates, at least for a time.

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    1. Nippon does not currently provide "hundreds of family wage" jobs. That is another local urban myth they have propagated to enhance their standing and influence in the community.

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    2. So true. Nippon and Nippon's cheerleaders have always falsely touted the hundreds of jobs Nippon provides. The present number of mill jobs is reportedly under 200, and steadily shrinking.
      When pinned-down about the net number of new jobs that would allegedly be created by the biomass plant, the recently moved-away Harold Norland admitted that perhaps there might be one new job --- for a chip truck driver. His rhetoric was much more about "retaining" jobs than creating jobs; as in "Give us more public money and tax breaks or we will close the mill completely."

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    3. Harold was always...flexible with his numbers. Per the number of employees at Nippon, I heard him go as high as 240, and as low as 180. That's quite a spread, huh? But Harold would clearly use whatever numbers would inspire/scare his audience, as needed.

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    4. Anon 9:25..."Port Angeles electricity rates are among the cheapest in the entire country." No. No, they aren't. I pay power in CA, as well, and PG&E, which is expensive, is way cheaper than here.

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    5. Even if it were true that the rates themselves here were lower than average (which they are not), all of the add-ons and Cutler legacy charges would still tip utility costs here into the realm of ridiculously expensive. Port Angeles likes to tout its status as a "full service" city, and they maintain this status by charging full prices and then some for those services.

      And don't forget: You can't halt one service without turning them ALL off. Going out of town for a couple of weeks and want to stop your garbage pickup? Then your water and power will have to be shut off too. It's a racket - an expensive racket. One that certainly doesn't have customer service in mind at all.

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    6. Waste Management (the huge conglomeration that operates 90% of the garbage collection in the county...the garbage mafia) doesn't let you not have garbage pickup on a "vacation hold". They charge you, if you get pickups or not.

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  6. My friends who work at Nippon say there are a lot of rumors and a lot of rumblings going around. Apparently no one is feeling very confident about their jobs lasting for the long-term. What you're saying here would seem to support those worries.

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  7. I think it's safe to say that when the mill closes, and/or switches to simply being a power plant, Port Angeles is going to have all sorts of problems.

    Financially, as you spell out, the city will take a big hit in their flow of tax dollars. Laid off workers will spend less and those taxes will go down, too. Unemployment will go up, of course. Meanwhile, thanks to the biomess plant, we'll still have the "benefits" of trucks full of fuel for it going through town 24/7, and the smokestacks, and the visible and invisible pollution. We'll still have a mill building blocking up access to our otherwise desirable and promotable spit. And on and on.

    All this because our braindead, scared little leaders haven't seen the writing on the wall. They still don't even want to discuss the possibility that the mill will shut down someday. But it will. Even Harold as much as said that on numerous occasions, with all his talk of shrinking markets and increasing competition. It is inevitable that the mill will close, and doubtlessly sooner than later.

    And despite the many, many warnings and clear indicators that such a day was coming, our city council members will no doubt express their great "shock" that such a thing came to pass. Whether they are really that stupid or just stubbornly, willfully blind, it doesn't matter. The results will be the same either way: More tragedy, debt and despair for Port Angeles.

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    1. "Whether they are really that stupid or just stubbornly, willfully blind, it doesn't matter."

      It is just politically expedient to just keep spouting the party line.

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    2. Yes, buy WHY is it expedient? WHY is it the thing to do in the face of so much evidence that it would be smarter to do something, anything, else?

      Is it that the politicians know we won't actually do anything? That we won't actually show up at meetings or vote them out of office? Is it that they're gaming the system so we have uncontested elections and we CAN'T vote them out of office? Are they getting paid off and don't want to disrupt the gravy train?

      Why is it that the stupid thing to do is the smart thing to do in Port Angeles???

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    3. You've got most of it in saying they know we won't show up to meetings, or do much about anything they do. They don't have to do anything nefarious. We show them constantly that we don't do anything but bitch and moan about the state of things.

      And as has been stated before, it really is about the city staff. They are the ones that write the reports and recommendations that the Council members read and vote on. The expedient part is the "go along to get along" attitude. Even if Council members have concerns about what they are told by staff, they pretty much have to "go along" with anything the staff comes up with. Otherwise, why HAVE staff, if you don't use what they come up with?

      So, if staff is stupid (and we all have seen examples, such as Cutlers Turd Tank), then as you say, the smart thing to do in Poirt Angeles is really stupid.

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    4. So do staff members really like living in such an economically and culturally retarded place? That's what they've created, after all. Is that there goal? IS there a goal?

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    5. Staff gets paid VERY well, gets great bennies, and have a secure job (which in this day and age, are area, counts for aLOT!).

      Plus, they can totally screw up, with no consequences. Many take days off at will, because there is so little to do.

      It isn't about some evil conspiracy, they're just "staff", and they run the show.

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  8. Remember PenPly? Remember how they were only possible because of all the government money and loans and deferred this and reduced that? Then they went belly-up anyway.

    That's right where Nippon is today. Making paper for phonebooks and newspapers? Not a growth industry, that's for sure. Only the government giveaways are keeping them going now.

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  9. If the city were to start charging Nippon fair market value for the millions of gallons of water it uses a day from the city's industrial pipeline, the revenue would go a long way toward putting the city budget in the black. Here are a some stats gleaned from attending city council hearings on proposed utility rate increases (increases for the reset of us; not for Nippon!):
    Nippon pays the city a flat rate of $15,500 a year for the right to use up to 20 Million gallons of water a day at the mill.
    Unlike residential and commercial customers, the city does not bill Nippon a water-consumption rate based upon metered water use.
    If the city were to bill Nippon at 2010 residential rates for its allotted 20 million gallons/day consumption, Nippon's annual water-use bill would be $19.66 million.
    The mill's $15,500 annual flat rate water bill has not been increased since 1929; although in recent years the city has asked Nippon to reimburse costs of maintaining the industrial pipeline. Pipeline maintenance charges averaged under $40,000/year through 2010.

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    1. Some of what you touch on here will be part of Part Two of this post.

      But really, does ANYONE think that $15,000 a YEAR for 20 MILLION gallons a DAY is anything even remotely close to fair market value? How many millions of dollars has this City given away just on this one issue? Call it criminal negligence or criminal stupidity, either way, it's criminal.

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    2. If things keep on going the way they have been in Port Angeles, soon $15,000 a year will be the average annual residential utility bill.

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    3. Anon 5:57PM - If that were the case, then we might - might - see some movement from the city to charge Nippon $16,000 a year, just to keep things "fair."

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  10. One aspect of this issue that I thought of immediately, but that hasn't been mentioned here that I can see, is notice. As in, how much notice will Nippon give the city when they make this switch? I would be shocked if the city had been smart enough to ever get anything relating to this in writing, because they clearly seem to think - or hope - that Nippon will just go on and on and on forever. But I'm betting that whatever notice comes from Nippon - if any - will be the bare minimum. This will produce the maximum disarray and panic in city hall, and perversely, would probably only make them MORE likely to kiss Nippon's ass in the future.

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    1. and, yet again we have BLOOR to thank for not doing his job, still. He is clearly not interested in protecting, just taking a paycheck.

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  11. So...I've been doing the Google search thing to see if there are any PDN articles of interest before clicking on them, to safeguard my free views, right? Being it's the PDN, there haven't been any articles of interest until today. SO I clicked on the link to go to one about the Port, right? Well, that page opened up - briefly - then it switched itself to the PDN's homepage, and that started trying to refresh itself over and over again even though I certainly wasn't hitting any such thing.

    Seems like the PDN is - once again - gaming the system, to try and get people to run through their free clicks immediately. Anyone else experienced this?

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    1. I have my settings so that I have no cookies stored. No "history". I have to "search" for every site I visit, every time. But, it seems to eliminate a LOT of problems I used to have.

      I'm not computer savvy enough to know if this will address the PDN counting my visits, but, I don't rely on the PDN enough for it to matter. As you say, there aren't that many articles of interest.

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    2. I clear my cookies constantly, too, so that's not the issue here. The issue was that their site switched pages on me, then started reloading and reloading their homepage until I hit the "home" button.

      If it's sleazy, the PDN will do it. They don't care about how it looks, or if it alienates people. They're just scumbags.

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    3. It's all the papers of the Canadian parent company doing this crap. From the Whidby Island rag, to the Kitsap one. This is a parent company imposed nonsensical money grab, to try and make some profit. Since they control the small newspapers in the region, I can only assume they're doing this as a last gasp before the shut some of these irrelevant newspapers down.

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  12. “These alternatives do not satisfy me. I think we deserve better,” Calhoun continued. “The idea of having a wilderness that is not managed by man is just crazy.”

    Not being managed by man is the very definition of wilderness, you idiot.

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    1. John Calhoun is a land-raper through and through. He has the compassion of a black widow, and the charm of the world's smarmiest used car salesman. Of all the local crooks and conmen, he is perhaps the most despicable (in my opinion).

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    2. That article made me want to unscrew my head. No wilderness=no reason for anyone to come see it!

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