Bargain hard, then build the Cob plant

Published July 28, 2004

The Cob power plant near Bonanza will be a benefit to the region's economy, and it should be built. Based on the history of the construction of the Klamath Falls cogeneration plant, the region can expect a strong pulse of construction-paycheck spending - up to two years of it. Then the plant will employ 20 or so people in stable, high-paying jobs that this region needs badly.

Beyond that, Klamath County should expect to see benefits in tax revenue, or, as the power company proposes, payments in lieu of taxes. These will bolster a county government whose finances are so slender that it contemplates closing tourist attractions such as museums.

However the payments are structured, they should go well beyond paying the plant's way in terms of roads and county services. Klamath County and the Langell Valley will have made concessions. An industrial plant will intrude into an agricultural region, and such a plant can't be inconspicuous or fail to have an impact on rural life. And the plant will result in some pollution - not nearly so much as comes from coal-fired plants, for example, but some nevertheless.

Peoples Energy has put its offer on the table: $1 million a year, indexed to inflation, for 15 years. That's the figure it's been quoting since it began working on the plant.

Now it's up to the Klamath County commissioners to get the best deal possible for the county. Each side has something the other wants: Peoples Energy Corp. has a valuable site, and the county would like to see the economic benefits of developing it.

Here's an example of one element of a counteroffer from the county: The Peoples Energy offer doesn't include money for the schools. It should.

The plant's employees are likely to generate children, and if the plant has the economic ripple that it should, it will have an effect on the schools.

Beyond that, it's fair for a major investor in a place to support good schools, and more so in a place such as the Klamath Basin, where children in general are in such great need.

It may take some creative financing to make school payments happen. If the power plant were subject to regular property taxes, the schools' portion would be spread out all over the state, resulting in only a bit for local schools. This is called "equalization," and it is a raw deal for our region - as when the federal government allocated money to Klamath and Lake counties to substitute for logging revenue payments to the local schools, and state officials took away the money to spread throughout the state.

If the commissioners need some help and some time, they should get help and take time. It wouldn't be hard to hire consultants to get an independent feel for the economics of the plant and to compare tax contributions among similarly situated power plants in the West.

And since Peoples Energy hasn't set a date for moving earth, the commissioners shouldn't feel rushed to conclude the negotiations. In any case, the tax bargaining will be settled long before the siting controversy, so the commissioners have time to strike a hard, fair bargain with the developers.

The "H&N view" represents the opinion of the newspaper's editorial board. Tim Fought wrote today's.