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IP Granted Big Tax Break by Springfield, Ore., to Upgrade Linerboard Machine

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The Springfield, Ore., USA, city council earlier this week granted a major tax break to International Paper Co., Memphis, Tenn., in a bid to keep the paper company’s linerboard mill operating in the community well into the future. According to an article by The Register-Guard local newspaper, IP requested the property tax exemption through the city’s enterprise zone program. The company is considering a $101.6 million upgrade to the mill. City estimates show that the exemption would save IP more than $8.5 million in property taxes on the upgraded equipment over a five-year period.
 
 

The upgrade won’t add jobs beyond an estimated 400 temporary contract workers for the project, but a company official has said it can offer "a long and reliable operation of the mill," the newspaper article reported. Under the exemption, the mill would be allowed to actually reduce its workforce by up to 20%. But Kally Hodgson, an executive for the company, told city councilors the company has no plans to reduce the mill’s workforce.

The mill plans to replace both the linerboard machine headbox, and the main boiler floor that burns fuel to power the papermaking process.

While IP would not pay any property taxes on the new equipment for five years, it would continue to pay taxes on its existing mill. The company also agreed to pay a total of $500,000 over the five-year period to offset the loss of the removed equipment valued at between $3 million and $4 million, according to The Register-Guard.

As detailed in the article, IP, the county’s top taxpayer during the 2014 tax year, was assessed more than $5.3 million in property taxes during the 2014 tax year. The new equipment is estimated to bring in an additional $650,000 a year once it’s added to the tax rolls, although depreciation would reduce that figure in future years.

IP’s Springfield mill employs about 280 people within the enterprise zone. The company said it will decide in coming weeks which of its mills will receive capital funding. If selected, construction on the Springfield linerboard mill upgrade would begin in September and wrap up in 2016.
 

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