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In The News

Cargill to get most of tax break it sought

By Paul Rogers

Bay Area News Group, The Daily News, 11/14/09

In a victory for Cargill Salt, the Internal Revenue Service has awarded the company most of the tax break it had been seeking in connection with its sale six years ago of 16,500 acres of industrial salt ponds in the South Bay for wetlands restoration.

The value of the property has been sharply debated since the 2003 purchase.

The IRS concluded that the lands that Cargill — an agribusiness giant based in Minneapolis — sold to the state and federal government for $100 million are worth $200 million, Lori Johnson, a Cargill spokeswoman, said late Friday.

Cargill had argued they were worth $232 million. The company was seeking a tax deduction for the $132 million difference, claiming it as a donation to the public. Instead, it will get a $100 million deduction.

Some environmentalists, citing flaws in the appraisal on which the deal was based, said the lands were grossly overvalued and that Cargill deserved no tax break.

The final value has been considered critically important because it will help set a price for future public land purchases around the bay. From Napa to Fremont, biologists are attempting to restore thousands of acres of hay fields, old salt ponds and other properties back to natural conditions for ducks, fish and other wildlife.

Johnson said that although the IRS auditors didn’t agree with the full amount that Cargill claimed, they agreed to most of it, and the company feels largely vindicated.

“I would hope this would reconfirm for the residents of the Bay Area that the agencies that were involved in this played it straight,” Johnson said. “The property was worth well over the amount of taxpayer money that went into it.”

Environmentalists said they are disappointed.

“I’m just heartbroken. You have no idea how distressing this is,” said Florence LaRiviere, co-founder of Citizens Committee to Complete the Refuge, in Palo Alto.

“As long as these fraudulent appraisals persist, we are going to have a terribly hard time acquiring what’s left.”

Feinstein brokered deal

The salt ponds stretch from Hayward to San Jose to Redwood City along the Bay’s shoreline. They have been used for a century to evaporate salt for roads, medicine and food. But in recent years, they also have been coveted by biologists for their potential to be restored back to marshes for wildlife. The deal to acquire them six years ago set in motion the largest wetlands restoration effort on the West Coast.

Under that deal, brokered by U.S. Sen. Dianne Feinstein, D-Calif., Cargill sold 16,500 acres of salt ponds to the U.S Fish and Wildlife Service and the state Department of Fish and Game in 2003. Of the $100 million sale price, $72 million came from state bond funds, $8 million from the federal government and $20 million from the Packard, Moore, Hewlett and Goldman foundations.

But the $100 million sale price wasn’t what the government and Cargill said the land was actually worth. The U.S. Fish and Wildlife Service hired an appraiser who concluded the value of the land was $243 million.

The deal became mired in controversy.

The state Department of Fish and Game released the appraisal in 2003 after the deal had closed. It was 28 months old, despite federal rules requiring appraisals to be updated every 12 months.

The appraisal also noted that under the Clean Water Act, the ponds probably could not be filled or developed, dramatically reducing their value.


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