As little as $10 million, as much as $30 million.
That's the amount of tax revenue that will be lost to the state in the wake of Micron's announcement it will delay opening its Lehi computer chip manufacturing plant three to five years. And lost state revenue could result in a smaller tax cut, legislative leaders said Tuesday.Micron Technology Inc. announced Monday it would delay completion of its new $2.5 billion Lehi memory chip manufacturing plant until the market improves. Work on the plant's shell will end in six to eight weeks.
Micron already has spent $400 million on the plant and will pour another $100 million to $200 million into the facility before work wraps up. As many as 40 employees Micron has already hired for the Lehi plant will be offered positions in Boise, company officials said.
Micron officials are meeting with state, county and school district representatives to work out adjustments to impact monies the company pledged.
With a Wednesday night deadline to pass a 1996-97 state budget, the gloomy economic news sent state economists scrambling to determine the extent of the damage and how the state can balance its budget with up to $30 million less money.
One solution being seriously considered is to reduce the anticipated tax cut, which before the Micron announcement had been pegged at $100 million. "That would be an obvious place to look," said Senate President Lane Beattie, "but there are other ways, too."
Other options include replacing the $30 million (or $20 million if economists decide to split the difference in their various estimates) with money that had been budgeted for capital projects and then increasing the size of the capital bond by that amount.
Another option is to ignore the shortfall; $20 million in a $5.4 billion budget is not much.
One option that is not being considered is to cut the state budget."I don't believe we will go back into the budget, whatever it (revenue shortfall) is," Beattie said.
Whatever that shortfall may be, lawmakers and Gov. Mike Leavitt were trying to put the best face on the gloomy economic news.
"I have a hard time seeing anything negative about a company with $500 million in the ground with plans to spend $2 billion more," Leavitt said late Monday night. "It is disappointing and disruptive, but it is not the kind of thing that will alter the course of the (Utah) economy."
Maybe not, but lawmakers - flush with cash all session long, but also facing a midnight Wednesday deadline to pass a budget - were clearly nervous about what it all means to state tax collections.
"We're in it deep, and it doesn't matter what anybody says publicly. A lot of what we based future (economic growth) predictions on was Micron and the spinoffs from Micron," said one Senate leader.
Economists from the State Tax Commission, the State Office of Planning and Budget and the Legislative Fiscal Analysts Office worked throughout the night and into Tuesday morning re-examining the budget and how the announcement will reduce anticipated revenues.
Although the Micron announcement may not significantly alter the state budget over the short term, lawmakers say it could have serious economic ramifications. The city of Lehi, as well as the Alpine School District and Utah County, have all been gearing up for an infusion of population. And investors trying to capitalize on the boom have purchased property for subdivisions and businesses.
In Lehi, the bombshell has city officials pacing the floor, wondering what's going to happen next.
"Now it's kind of a guessing game. Who knows?" said Knollin Haws, a former City Council member who help broker the deal that landed Micron.
City officials have more questions than answers.
Infrastructure improvements Lehi and its northern Utah County neighbors were counting on to support the chipmaker and an ongoing influx of residents and business are indefinitely on hold.
"I get mixed emotions on it. They've made certain commitments to us. I hope they follow through all the way out," Mayor Bill Gibbs said.
Micron agreed to front Lehi $70.7 million through the city's redevelopment agency for new roads, sewer and water lines, utilities. The city estimated that Micron has spent about $18 million so far on those improvements.
In its statement, Micron said it is working with city, county and state officials to revise the timing of the projects.
Meanwhile, some northern Utah County residents are wondering whether the plant site will become an eyesore at the base of Traverse Ridge.
"Are they going to landscape it to stop the mudslides up there? Are they going to fix the road because they tore it up?" said Allen F. Thomason, a Highland certified public accountant. "Frankly, most of us are relieved it's not being built. On the other hand, we feel like we're taking it in the shorts."
Haws said Micron is not walking out on the city. "We haven't had to put up any money nor have we put residents at risk," he said.
But Gibbs said there is a possibility that Lehi could bond for infrastructure dollars. That money would be paid back as other businesses move to Lehi, he said.
The Lehi Redevelopment Agency adopted a $125 million budget and incentives package, including the $70.7 million, for Micron precisely so it wouldn't have to borrow money. Lehi was to pay Micron back over a 10-year period using the company's taxes.
Richard Bradford, executive director of the Utah Valley Economic Development Association, believes Micron will come through.
"That project up there is money in the bank. That plant eventually will be fully staffed and equipped," he said.
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ADDITIONAL INFORMATION
Micron timeline
Oct. 22, 1994: Micron announces plans to build a new $1.3 billion manufacturing plant.
Dec. 27, 1994: Payson and 12 other cities make Micron's prospective site list.
Feb. 14, 1995: Micron announces a short list with three sites: Utah County; Omaha, Neb.; and Oklahoma City, Okla.
March 1, 1995: Micron postpones announcement of site of its new plant.
March 3, 1995: Micron again delays its site announcement.
March 9, 1995: Word of the new site is put off again.
March 13, 1995: It's Lehi, Utah! Micron makes it official, saying it has selected the northern Utah County location for the $1.3 billion plant. Officials say the plant will eventually employ up to 4,000 people. Lehi Mayor William Gibbs admits the scale of the project "scares" him.
March 28, 1995: Micron's fortunes are riding high as company announces two-for-one stock split.
June 23, 1995: Ground work begins for the Lehi plant - eight days ahead of schedule.
July 1, 1995: Micron officially breaks ground for its new facility. Company officials say they'll begin hiring workers in six months and that the first memory chips will roll off production lines in August 1996.
Aug. 25, 1995: Micron says the Lehi plant will now cost $1.7 billion.
Aug. 30, 1995: A 50 percent boost in employment in Utah County is attributed in large part to the Micron project.
Sept. 3, 1995: A report estimates Micron will generate $45 million in revenue for state and local governments.
Sept. 11, 1995: Micron's stock hits an all-time high of $94.375.
Sept. 22, 1995: Micron posts profits of $844.1 million for fiscal 1995.
Sept. 27, 1995: The incentive package for site improvements and utility costs at Micron's Lehi plant triples from $35 million to $123.6 million. In Boise, the company announces it will split $28 million in profit-sharing with its 6,300 employees.
Oct. 18, 1995: The cost of the Lehi facility is tagged now at $2.5 billion, twice as much as first planned.
Dec. 5, 1995: The 2,500 construction workers at Lehi put in 10-hour days in multiple shifts.
Dec. 19, 1995: Micron posts net income of $328.5 million for the first quarter of 1996, a record.
Dec. 28, 1995: Micron halts overtime and shiftwork at Lehi site, saying it is "moving to a more normal construction schedule."
Jan. 11, 1996: Fifteen employees hired to work at the Lehi plant arrive in Boise for training.
Jan. 18, 1996: Steve Appleton, Micron chairman, CEO and president, resigns for "personal reasons."
Jan. 24, 1996: Micron announces it will replace general contractors at the Lehi project with its in-house construction firm, Micron Construction.
Jan. 26, 1996: Steve Appleton rejoins Micron as chairman, CEO and president.
Feb. 3, 1996: The Utah Department of Employment Security says the slowdown at Micron may have caused unemployment in the state to rise from 2.8 percent to 3.1 percent in December.
Feb. 6, 1996: Micron board member Allen T. Noble resigns. The industry speculates he butted heads with Appleton.
Feb. 12, 1996: Micron says production in Lehi won't begin until the "first half of 1997." That's later pegges as August 1997.
Feb. 26, 1996: Micron announces it will finish the shells of the buildings in Lehi but plans to delay other work and opening of plant indefinitely.