Vermont Gov. Howard Dean's proposal to attract plastics processors to the state by cutting taxes has city officials and homeowners angry, and the plan may not live through legislative debate this week, opponents say. Dean wants to phase out Vermont's local-option machinery and equipment tax, a levy on equipment purchases minus depreciation, over five years. New facilities would be immediately exempt.
He sent Vermont officials to a state-funded booth at the Medical Design and Manufacturing Show held Feb. 6-8 in Anaheim, Calif., to promote the state and the tax repeal idea. James Griffiths, a Vermont industrial recruiter in the booth, said Vermont has 23 plastics processors, mostly injection and blow molders and extruders, em-ploying nearly 3,000.
There is ``no question'' some of the processors located in Vermont because of exemption from the local-option machinery tax, according to one state industrial development official who asked not to be named.
Economic Development Commissioner Frank Cioffi said the bill has become critical to attract large companies to the state - in particular, IBM, which plans a $4 billion expansion of its computer chip-making operation in Essex, outside Burlington. That town is expected to repeal the imposition of the tax in a ballot referendum March 5.
But State Rep. Oreste Valsangiacomo, chairman of the House Ways and Means Committee, predicted Feb. 20 that Dean's statewide repeal measure would not get his support in its present form.
``I don't see how we can mandate it on the towns and then ask resident property owners to replace the $27 million it raises in a year,'' he said.
Said Valsangiacomo, ``There is not a single company that has not come into the state because of the machinery and equipment tax.''
Mack Molding Co. moved into its Arlington plant two years ago with an agreement with the city to exempt the facility from paying the equipment tax, which the city officials under current state law can do.
Critics such as Michael Welch, Barre city manager, said the tax represents 10 cents on the property tax rate - about $300,000 of the $8 million that Barre, population 10,000, collects in taxes a year.
``It's not a big chunk, but it would have to be replaced somehow,'' Welch said.
In any case, Barre would ``love to have some plastics companies in the state. We'd make them a really good deal,'' he said. Despite the machinery tax, the city has the ability to impose tax stabilization, which allows it to provide ``very favorable terms for that company in terms of depreciation,'' Welch said.
Rutland Mayor Jeff Wennberg contended Dean's proposal will take $1.6 million from Rutland's books, with a large part coming from the $23 million assessment on General Electric Co.'s jet engine division in Rutland.
Wennberg said he backs the principle behind Dean's proposal, but contends local property owners should not have to shoulder the corresponding tax hike.
Rutland was one of Vermont's first cities to phase out a similar levy, an inventory tax, in 1988. Now, said Wennberg, hardly any of the state's 246 incorporated areas assess the inventory tax. ``Competitive pressure did that,'' he said.
Already, towns of Colchester, Milton and Waterbury have eliminated their equipment taxes.
Mark Paulsen, Colchester Town Assessor, said the largely residential suburb of Rutland lost an estimated $4 million in assessed revenue. But, he said, ``We're adding more assessed dollars in real estate than were giving up in personal property.''
Repeal ``has worked for us. Since we've started phasing out, we've been able to bring to town two large office buildings. Whether they would have sited here anyway is hard to say, but one of them moved from another city in Vermont,'' Paulsen said.