Garnet USA applies for state tax incentive

Reconstruction and expansion continues at an almost exponential rate at Garnet USA in Alder. The work and expense is enough that the company is seeking out help from the state.

Project engineer Brian Jackson said the initial intent was to rebuild what was there but much of what stood on site was not able to be rebuilt and much more was not worth the time and financial investment to rebuild compared to building and buying new.

“We kept some of the buildings themselves, the layout of the buildings and the platform for which they will be used, but started from scratch with everything else,” Jackson said.  “We are rebuilding from the inside out.”

The Montana Legislature passed a bill that encourages businesses to spend as much extra money as they need to in order to start a new business or expand an existing one. The bill created a tax incentive that reduces the business’ taxes by 50 percent during the first five years after it was created or expanded. The company would pay 40 percent the sixth year, 30 percent in year seven and so on until full taxes are paid in the 10th year after expansion.

The cost of this project has ended up being three to four times more than originally estimated. Despite the higher bill and longer timeline, the investment should pay off in the long run, according to Jackson. He said many of the previous owners ramped up production right away and did not stick out the slower periods of business. The updated facility and plant should be able to produce a high quality product that meets specifications and keeps production at an even keel and continues to bring money into Madison County.

One part of Garnet USA’s permit application for an open pit mine and changes to the facility and plant includes an environmental impact study with DEQ. This process requires documentation of the economic impacts as well, including one specific to the county.

“Our goal is to put out about 50,000 tons of garnet a year,” Jackson said. “Everyone wins if we create steady production. We have to apply for the tax incentive now.”

With the increased output comes the need for an increased number of employees. Jackson said they hope to have about 60 full-time employees on staff. Garnet USA currently has about 40 employees. Six months ago, Garnet USA had 20 employees.

Currently, Garnet USA’s employment level means there is between $458,780 and $688,171 total potential yearly state and local tax revenues coming in from those employees in a mix of employee compensation, indirect business tax, households and corporations. These numbers came from an economic analysis Garnet USA contracted Ecosystem Research Group to conduct. An additional 30 to 60 jobs in this industry would create a total of 50 to 99 jobs in Madison County.

Indirect services such as truck driving to transport product and creating more household income would create induced demand for even more services in the county, such as groceries, health services and retail goods. The additional labor income in the region ranges from $2.6 million to $5.3 million and the additional output is estimated to be between $13.2 million and $26.5 million.

“The mining of nonmetallic ore industry has a higher average labor income and average output per worker than both the associated indirect and induced industries,” Ecosystem Research Group documents said. “The average annual wage in Madison County in 2010 was $29,763 and the planned average wage for additional Garnet USA employees is $43,428. Average output per worker is higher in the mining of nonmetallic ore industry than in the associated indirect or induced industries.”

According to Jackson, staff at the Montana Department of Revenue have been extremely supportive of Garnet USA’s intent to apply and told Jackson and others that its project is exactly what the incentive was designed for. The expansion of operations at Garnet USA would result in increased property and income taxes.

A public hearing has been set on this matter for Aug. 28 at 10 a.m. in the Commissioners’ Conference Room.

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