January 5, 2015
In most aggregates operations, producers look for ways to shave pennies, nickels, and dimes from their cost per ton. After all, in a traditionally low-margin, high-volume market, those pennies can add up to serious bucks on an annual basis.
Now, imagine learning that your costs are going to increase by nearly a buck a ton and there is little you can do about it. That’s what is happening in Banning, Calif., where the local city council put a ballot initiative, Measure J, before voters to assess an 80-cent-per-ton tax on every ton of aggregates produced in the community.
Banning officials also allocated $50,000 in taxpayer funds to produce “educational” fliers about Measure J. The city’s sales pitch was simple and focused on two emotional hot-buttons:
Not surprisingly, voters approved the measure, which affects only one operator: Robertson’s Ready Mix. The producer will now pay taxes twice; once when the material is produced and again when it is sold.
While some communities do assess taxes on aggregates production, the vast majority are used to offset impacts the community bears in association with a mine. For example, some taxes fund environmental studies, pay for road construction around the mine, or provide guarantees toward reclamation efforts. In this case, however, the tax will go to the general fund to pay for such services as police, fire, and general street repair.
And no wonder. Banning has a much higher overhead than the neighboring San Jacinto. While San Jacinto has a 50-percent higher population, it has less than half the number of city employees on its payroll. Banning has been operating beyond its means and is looking to a private company to make up the difference.
Robertson’s has fought back. It took the city to court over spending public funds to promote the issue, and a Superior Court judge told the city to stop. That decision came days before the vote, and the damage was done.
Robertson’s must now choose from several unpalatable options. It could shut or slow down production at the site. It could accept a higher cost structure in what it has described as an “inelastic market” where the cost could not be added to the final product. Or, it could pursue the matter in court once again.
None of those options are good for an aggregates producer, and community schemes such as Measure J should disturb aggregates producers throughout the United States. After all, California dreams, and nightmares, have a way of working their way east.