The TIF Vote for Panasonic's Project Ocean
Mayes County, Oklahoma residents will have two 'Yes or No' propositions unique to to them to vote on during the upcoming midterm elections happening on Tuesday November 8th, 2022. Proposition No. 1 is very straight forward:
Shall sales of alcoholic beverages on Sundays by retail spirits licensees be allowed in Mayes County, Oklahoma?
Proposition No. 2 is much more complicated:
The Board of Mayes County Commissioners approved Resolution No. 22-33 which establishes an approximately 588-acre ad valorem tax increment financing district (TIF District) in the MidAmerica Industrial Park (Park) but defers the official creation of the TIF District to a later date. The main purpose in creating the TIF District is to collect additional ad valorem taxes on increased valuation of property in the TIF District (Increment Revenue) to induce Project Ocean to locate in the TIF District, by using the Increment Revenue as divided to provide: (1) up to $100 million in direct financial incentives to Project Ocean; (2) up to $50 million to fund public infrastructure improvements within the Park; and (3) up to $150 million to the taxing entities. The TIF District will last 12 years or until $300 million in Increment Revenue is collected, whichever comes first.
That makes perfect sense to me, but only because I've been following along for almost a year now. If you don't know what a TIF is, you might be confused.
TIF stands for Tax Increment Financing. A TIF is used as an incentive to recruit new employers in a specific area and a valuable investment in buildings and equipment.
Lets do a simple review of how it'll work here. The industrial park (MAIP) has 600 acres with no one or company using the land. It lays undeveloped and collects $0 in tax revenue. If it stays in this condition over the next 12.5 years, it would collect a grand total of $0.
But if the TIF is passed (again) and Project Ocean(Panasonic) comes in, they make improvements to the land driving up the tax owed on the property. It is estimated Panasonic would owe, and pay, $24 million in taxes annually. Over 12.5 years the property would collect $300 million in taxes. However, due to the TIF being active, that $300M would not go the typical route of collected county taxes. Instead, $100M of it would essentially be rebated back to Panasonic to offset their costs of construction and another $50M would go towards MAIP for infrastructure improvements. The other $150M would still end up as Tax revenue to benefit the residents. After the 12.5 years or $300M taxes collected, whichever comes first, the TIF would end and the full $24M annual taxes would be collected as normal thereafter.
For the county residents, it represents a possible situation of "a bird in hand is worth two in the bush". If they vote YES, they are essentially saying that having Panasonic come and getting $150M in tax revenue(the real bird in hand) plus the local economic stimulus that 4000 jobs brings is better than voting NO and holding out for someone else to come along and pay even more(the hypothetical birds in the bush). If Panasonic comes and invests $4 billion in Mayes County, it would be the largest investment and jobs announcement in the history of Oklahoma. That is one big bird.
Will it pass...again?
The TIF was already passed once, by the county commissioners. Oklahoma law allowed for their ruling to be cast aside and instead put to a vote by the residents in a referendum if 10% of the registered voters signed a petition to do so. An anti-TIF organization was able to collect the required signatures and send the vote to the public.
Despite it being forced to a referendum, I still think it is likely to pass. Whether the TIF becomes active or not depends on a majority vote, a much higher bar than just 10% and I wonder how many of the people who signed the petition were still pro-TIF but felt it was a reasonable request that it go to a public vote. The School Board, Unions and most local leaders have all backed support for the TIF.
The risk of a surprise upset NO vote lies in the ballot wording being misunderstood or the general population thinking it doesn't matter anymore. For someone uneducated on the topic, they might read the ballot measure and wrongly take away "to collect additional ad valorem taxes on increased valuation of property" to mean a tax increase on their property taxes. The other risk is apathy from voters saying NO because they think its a lost cause since Panasonic choose to build a plant in Kansas. That is not the case, in August, The Wall Street Journal reported that Panasonic had said they are still looking to build a $4B battery factory in Oklahoma.
If the TIF passes, I believe it is extremely likely Panasonic will honor their word and build a battery plant. With the passing of the IRA, battery cell producers qualify for $35 per kWh as a tax credit. Panasonic's current 35 gWh factory in Nevada could net Panasonic $1.05 billion, annually, from the production credit. It is no surprise then that they would be interested in having multiple facilities up and running ASAP. There is also a $10 per kWh tax credit available to companies who take those cells and manufacture battery modules. Canoo is likely to qualify for that credit.
If the TIF doesn't pass, then again, I find it extremely likely Panasonic will honor their word and not come to Pryor. According to MAIP CAO, David Stewart, Panasonic will not come without the TIF passing. Perhaps instead they will go to a new Industrial Park outside of Tulsa.
If for some unlikely reason the TIF passes and Panasonic chooses not to come, then the TIF could be enacted at a later date and applied to another company as long as they identify themselves as "Project Ocean". Although in that case to get the maximum benefits they would need to match a similar level of investment and spending.
To find out more about Panasonic and Canoo's relationship to each other you can read our report titled "Canoo, Panasonic and State Incentives."
Authors disclosures: I am long Canoo - I own common shares, warrants and call options.
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