American Crystal and Pembina County Reach Property Tax Settlement

May 3, 2005

The Pembina County Commissioners and American Crystal Sugar Company have reached an agreement regarding contested property taxes at the Drayton, North Dakota sugar beet processing factory.

American Crystal had sought property tax relief for its Drayton processing factory for taxable years 2001, 2002 and 2003 through the formal abatement process. This resulted in a hearing held before the Pembina County Commissioners in which American Crystal Sugar presented its case for tax relief. At the conclusion of the hearing, the Commission denied the abatement request and the case proceeded to an appeal in the District Court. Recently, the parties had agreed to a short extension of time in the appeal process in order to discuss and consider the possibility of reaching a resolution of the outstanding issues.

In the meantime, American Crystal Sugar had also filed a request for abatement for its 2004 taxes. All of these abatement requests were filed in a timely and appropriate manner, and in accord with the rights that all taxpayers have to seek property tax relief if they have evidence that the value assigned to their taxable property is erroneous.

The taxable value assigned to the Drayton processing factory was based on an appraisal conducted in 1996 by the deputy state supervisor of assessments. That appraisal placed the value of the factory at $14,900,000, exclusive of the land. Since 1996, Pembina County has left the value of the Drayton factory at $14,900,000, and had made no adjustments for continuing depreciation.

This agreement involves compromises by both parties. The two significant components of the agreement are as follows: (1) American Crystal Sugar has agreed to withdraw its request for tax refunds for years 2001, 2002, 2003 and 2004. From a practical standpoint, all taxes paid under protest can now be released and the budgetary problems that would have otherwise resulted have been resolved. (2) A stable and rational formula is in place for arriving at the taxable value of the Drayton processing factory into the future. By way of illustration, as the formula is applied to the 2005 taxable valuation, the resultant number is $10,211,689, exclusive of the land. The net result is an annual reduction in taxes in the amount of approximately $80,000.

Speaking on behalf of the Pembina County Board of Commissioners, Hetty Walker, Chairperson stated, "This has been a difficult and complex issue, and we have tried hard to be fair and open minded when reviewing the evidence that was put before us. We were convinced that some property tax relief was in order, and we wanted to be certain that what we agreed upon was reasonable and would provide a way for us to move forward, working together."

"Obviously this agreement represents a great deal of work on behalf of each party along with an openness to fairness and compromise," said Jim Horvath, American Crystal President and CEO. "American Crystal's business is firmly rooted in Pembina County and we look forward to a mutually beneficial relationship with area communities far into the future."

In November 2003, American Crystal also reached a property tax settlement for its facility in Richland County, Montana. The company is still actively involved in property tax matters in Traill County, North Dakota, and Polk and Clay Counties in Minnesota.