"We'll survive if their (American Crystal's) protest is upheld. But it will affect everyone else's tax bill. If Crystal isn't paying it, someone else will be. Like me."

Warren Strandell, Polk County commissioner

Arthur and Corene Vaughn will be taking off their 52nd sugar beet crop this fall.

The Cavalier, N.D., area farmers were pioneers in bringing sugar beets to Pembina County. In 1952, Arthur went farmstead to farmstead, recruiting enough growers to make raising sugar beets viable in the northern end of the Red River Valley.

"American Crystal Sugar has been good to us because we've made good money with beets," Corene said. "Sugar beets have been wonderful for us and wonderful for our community. Sugar beets have given farmers a level of life that we wouldn't have without them."

That's Corene the grower talking. Corene the Pembina County commissioner sees the company another way.

That's because American Crystal Sugar Co. is seeking dramatic cuts in its property taxes. The grower-owned cooperative - meaning that the Vaughns and other growers are stockholders - is seeking property tax cuts that are roughly one-half to two-thirds of their current levels for their factories in Moorhead, Crookston, East Grand Forks, Hillsboro, N.D., and Drayton, N.D., which is located in Pembina County.

American Crystal's property tax bill for 2003, payable in 2004, is about $1.8 million for its facilities in the Red River Valley. So, if the cooperative is granted what it's asking, the tax money lost to schools, counties, cities and townships could top $1 million.

If granted, there would be cuts in government services. But, mostly, the other taxpayers would have to pay more to make up the difference.

"We'll survive if their protest is upheld," said Warren Strandell, Polk County commissioner. "But it will affect everyone else's tax bill. If Crystal isn't paying it, someone else will be. Like me."

And Corene Vaughn said she wants "to keep the tax base where it is. I believe everyone should pay their share. This would be a terrible low blow to the tax base in our county."

The Vaughns are among many growers in the valley who are caught in the middle of the tax protests.

Schools affected

In Pembina County, American Crystal was assessed $257,000 in taxes for 2003. Approximately $156,000 of that would go to the Drayton School District. That amount is one-eighth of the school's budget.

"This makes us nervous," said Bob Klein, Drayton superintendent of schools. "If it doesn't come in, our reserves at the end of the school year will be next to nothing. It has caused a lot of stress as far as negotiations, capital improvements and all parts of our budgeting process."

As rural areas with smaller tax bases, Pembina County and the Drayton School District and Traill County and the Hillsboro School District would receive the biggest hits proportionally. American Crystal's tax bill in Traill is about $408,000, with $248,000 of it going to the school district.

American Crystal paid those taxes on the North Dakota-based facilities under protest, which means the money sits in a special account and isn't available. When the dispute is settled, the appropriate amount of money will be distributed. In the meantime, the school districts, townships and counties will feel financial duress because their budgets assumed that money would be available.

"If this works for them, it could start a landslide of other businesses not wanting to pay their taxes, either," Klein said.

The Hillsboro and Drayton school districts potentially could receive the hardest hits. In the counties and in the cities of East Grand Forks and Moorhead, American Crystal plants are a smaller percentage of the tax base. And, in Minnesota, local property taxes supply a much smaller percentage of school budgets.

At Hillsboro, with a school budget of $3 million, American Crystal provides about one-twelfth of its funding.

"My best estimate is that, in November and December, we'll have to start borrowing money to operate," Mike Bitz, Hillsboro superintendent of schools, said. "If it drags on in the courts through January and February, when we receive most of our 2004 taxes, then it would be close to a half-million dollars that we couldn't access.

"It's a hardship."

Despite that hardship, Bitz is not critical of American Crystal.

"I'm not saying anything bad about American Crystal," he said. "Crystal is our biggest taxpayer, and I appreciate what it's done. It's also made the land more valuable around here than if it wasn't around."

Growers criticize

While Bitz won't criticize American Crystal, others will. Some of them are sugar beet growers themselves, such as Corene Vaughn, Glen Hultin of Hillsboro and Ron Peterson of Buxton, N.D.

Hultin is the chairman of Eldorado Township, site of the Hillsboro factory. Of the township's $28,000 budget, $13,000 comes from American Crystal taxes.

"They really put us in the hurt bag by withholding that tax money," Hultin said. "We've had to put off graveling our roads, which is by far the biggest thing we do."

Company officials say that getting the tax cut they're seeking would mean another 10 cents a ton to growers. But, Hultin said, growers that own land in counties that have plants will see a rise in their property taxes.

"It would mean $1,000 more in beet payments for me if what they say is true," Hultin said. "But I'd have my taxes raised more than $1,000. Sure, growers in Norman County (Minn.) might think this is a good deal, but it hurts us here."

Hultin said the tax protests have created division among growers. And they've created hard feelings that the cooperative isn't being a good neighbor.

"Whenever the plant had an improvement, they've asked for a 5-year, 50 percent reduction abatement on their taxes, and we've all had no problem giving them that," Hultin said. "But as soon as the abatement comes off, then they start protesting their taxes.

"Everyone in Traill County is mad at American Crystal. The people wonder now why they signed those CAFTA petitions supporting the sugar industry."

Peterson, a Traill County commissioner, said he's heard similar dissent. "Trying to shift your taxes onto their neighbors could turn into a public relations problem for American Crystal," he said. "I've heard a lot of negative feedback about this.

"Do the other growers think it's worth another two bucks an acre to have this public relations problem? I don't think it's worth it."

Anyone's right

American Crystal simply is exercising the same right that every taxpayer has, the chairman of the cooperative's board of directors said.

"If you think your taxes are too high, you have the right to do it, too," said Bob Vivatson, a grower from Cavalier. "This is a business decision and part of being right and fair. The board's responsibility is to look out for the company and be fiscally responsible."

Vivatson said that, based on other sugar beet plants that American Crystal bought across the nation, the value of Red River Valley factories is too high. "They weren't sold for anywhere near what they were taxed at," he said. "This is going on in several growing areas, not just here."

He said it's important to the region that the company remains financially healthy.

"There are 30,000 jobs in the Valley that depend on American Crystal and $3 billion of economic activity," Vivatson said.

Split household

Lonn Kiel of Crookston also is an American Crystal board member. His wife, Deb, is a Crookston School Board member.

"It puts us in the middle," Lonn said. "I'm on the one side, and she's on the other side. She hasn't told me point-blank to quit it, but she'll make her point occasionally that the Crookston School District is struggling financially."

Deb understands first-hand the trials of the sugar industry with free trade issues and also the importance of the industry to the Valley.

"But I'm also concerned where the school is at in the middle of that pie," she said. "As a school district, we can't cut any more.

"I feel like I'm in the middle, and it's hard to know what to do or say."

Lonn also has to wonder if the issue will affect his candidacy for the state House of Representatives. A Republican, he's running for the House seat held by DFLer Bernie Lieder of Crookston. But, as a board member, he said he needs to put the company ahead of his candidacy or family interests.

"I have to put on my board member hat when I sit in that boardroom," Lonn said. "Our job is to make the most money for the grower, to make sure the bottom line is protected on each grower.

"I don't like this to happen, and the board and management don't like this to happen. It makes for ill feelings all over the place. But we're trying to get a fair shake on our properties."

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