Micron Technology Inc. has finally signed an agreement with the city's Redevelopment Agency that will allow the computer chip manufacturer to begin recovering approximately $30 million.
The economic development agreement was signed by Micron and the Lehi City RDA last week. It had been on hold for a year while officials from Micron explored options for the partially constructed Lehi plant, where work has been virtually stopped since early 1996."When Micron went into the slowdown, we explored with Micron several options," said Reed Sunderland, a Lehi City Council member and chairman of the RDA. "They finally came back and agreed that the original contract with the 12 years (for repayment) is what they wanted."
Neither officials from Lehi nor Micron mentioned specific options that were explored. Micron spokesperson Julie Nash said the company always intended to sign the agreement, but the timing was changed when construction slowed last year.
Under the economic development agreement, the RDA will receive taxes levied on Micron's Lehi property. The RDA will then redistribute revenues among Micron, the city, Alpine School District and a special improvement district.
In order to install infrastructure at its Lehi facility, Micron put up approximately $30 million. The money has been used for sewer systems, culinary water projects, electricity, natural gas and roads connected with the Micron plant.
With the economic development agreement now in effect, the RDA can begin to pay back Micron's loan for infrastructure, using the company's own taxes.
The agreement says the RDA annually must pay 3 percent interest on the loan. Remaining tax revenues for the next 12 years are to be divided up, with 70 percent going to Micron and 30 percent to be divided between the city and Alpine School District.
The agreement was reached just in time to allow the RDA to function for the 1997 taxing year. All taxing entities in the county must adopt their budgets by mid-June for them to be effective this year.
"If this contract hadn't been in place, the taking of the tax increment by the RDA would have been delayed another year," Sunderland said.
It appears Micron's taxes on its unfinished plant will not be enough to meet budget projections for the RDA. Unless Micron resumes construction and starts production at the plant, all the parties on the receiving end of the RDA - including Micron itself - may receive less money than projected.
However, the 70-30 formula remains in effect regardless of the amount of taxes Micron pays. Despite the possibility revenues might not meet projections, neither Lehi nor its taxpayers are at risk, Sunderland said.
"We've felt Micron's been more than fair with us, and in the long run, we feel like the city will come out very well," he said. "We figure the taxpayers in the community can't have any gripes."
The only debt incurred by the RDA is approximately $400,000 for operating costs, and that should be repaid to Lehi within two years, Sunderland said.
If Micron were to sell the plant or fail to ever start production, it could stand to lose part of the approximately $30 million it fronted for infrastructure.
But if Micron decides to resume construction, it could provide even more money for infrastructure. The RDA budget could expand to as much as $70.8 million.
Nash said signing the agreement was not an indication by Micron of its plans to step up construction efforts, although the company still plans to do so when the market is favorable.
The Lehi agency is one of the largest ever in the state, Sunderland said, and one of the few in which the developer rather than the city has provided up-front money.
Under the agreement, Alpine School District could receive as much as $10.5 million by 2001. Lehi could receive as much as $15.9 million for road improvements and $2.5 million for the Timpanogos Special Service District, which provides sewer treatment.
The RDA itself could receive as much as $200,000 per year for 12 years to pay for operating costs. If Micron's taxes haven't allowed the RDA to meet its obligations at the end of 12 years, the RDA's debts are to be forgiven, the agreement says.