Yesterday I tallied up the incentives offered Micron Technologies to invest $3 billion in an expansion of its Manassas Semiconductor plant based upon information released by Governor Ralph Northam’s office and the Virginia Economic Development Partnership (VEDP). Today, thanks to reporting by the Washington Business Journal, we have a few details on what the City of Manassas chipped in.
Manassas did its part by agreeing to waive some permit fees and allowing the company to use third-party reviewers and inspectors. That, in turn, will allow Micron to save several million dollars and have greater control over the timing of permit approvals. The city also agreed to adjust its tax rate for semiconductor equipment each year so that Micron will benefit from gradual increases to its current bill in the next decade.
That last sentence looks like Manassas will create a special schedule for its Machine & Tools tax. Without the provision, Micron’s tax bill for manufacturing equipment would take a huge jump when the expansion goes live. The implication here is that Manassas will allow the higher tax bill to phase in over time.
According to the city website, the normal M&T tax rate is $2.10 of assessed value. A special tax rate for semiconductor manufacturing is $0.656 per $100 of assessed value. Let’s say for purposes of illustration that $2 billion of Micron’s $3 billion investment will consist of semiconductor manufacturing equipment taxable under the city’s current code at the rate of $0.656 per $100 of assessed value. That would imply an annual tax bill of $13.1 million.
That’s a lot of money for a city of 43,000 residents. It is understandable that city officials would be willing to give up some of the windfall — how much, we don’t know yet — in order to make the deal happen.
Stephen Moret, CEO of the VEDP, told the WBJ that Virginia is competing in a global economy in which giant incentive packages for projects like Micron’s is the norm.
There are other places around the world that regularly give facilities like this $500 million incentive packages,” Moret said. “Part of our challenge in Virginia is we’re normally not a significant incentives state. And certainly, we didn’t match what New York has done before, what Singapore has done before. But we knew we had to be competitive, so we worked together with the state and local partners to put forward the best package that we could and responsibly support.
