Mention the T word around California's only steel mini-mill, and some Tamco executives can get as hot as the 3,000-degree furnace they use in back of their Rancho Cucamonga plant.
Next to high energy costs, they say, state and local taxes would be a leading reason for moving the mill out of California. Indeed, Tamco officials still are simmering over an April vote by the Rancho Cucamonga City Council to impose a new utility tax on resident homeowners and businesses.
But are Tamco's taxes that big a burden?
At The Times' request, officers of the privately owned firm tallied taxes Tamco paid to state and local government in 1992. To their surprise, mill executives found the government's bite wasn't nearly as big as they thought.
In all, Tamco paid $1.9 million in taxes, or 2.27% of the company's operating expenses. That is in line with the 2% of operating costs that academic studies suggest is the typical tax burden of firms around the country.
After studying the figures, Tamco executives agreed that there is little real likelihood that taxes would chase them from California--even adding in the extra $50,000 that the new utility levy will add to their tax bill this year.
"Taxes, in and of themselves, would not be enough," acknowledged Michael DeLap, vice president for finance and administration.
Yet DeLap maintains that his company's frustration over the energy tax imposed by the city is emblematic of how California business feels about the entire taxation system. While the tax is a relatively small amount of the mill's costs, he said, it "represents a major irritation."
Initially, city officials intended to levy an energy tax of 4.66%, which would have cost Tamco $700,000 a year. After the company rallied business opposition, council members agreed to cap the tax at $50,000 for Tamco and other large users.
"For us to sit here and say, 'Thank you, you only took an extra $50,000 instead of $500,000'--I'm sorry, my brain doesn't work that way," said DeLap.
Rancho Cucamonga Mayor Dennis L. Stout said the council had no choice but to impose the energy tax, because Sacramento will have taken $5.4 million in property taxes away from the city by the end of next year. That money is needed to pay for fire and other city services that businesses need, he said.
"The more responsible ones, other than Tamco, are telling me they understand they have an obligation to the community to provide these services," said Stout.
Recruiters from Arkansas, Iowa, New Mexico, Idaho, Arizona and Colorado have tried to lure Tamco away. But owners of the mill--which melts 350,000 tons of scrap into reinforcing rods for concrete bridges, freeway abutment and sewers each year--like its proximity to the large Southern California construction market.
Still, other costs are prompting Tamco, whose electric-arc furnace makes it one of Southern California Edison's top 10 customers, to threaten to leave the state.
The mill applied to the state Public Utilities Commission for a deal that would cut its electric rates by as much as 15% during lean economic times, as long as the difference was made up during fatter years, DeLap said. But the firm decided to set aside its request after Gov. Pete Wilson signed a law freezing electric rates for manufacturers until the end of 1995.
"Without rate relief," DeLap insisted, "we're either dead or out of the state."
Tamco's Tax Bill
The following is a breakdown of state and local taxes paid in 1992 by Tamco, a privately owned steel mini-mill in Rancho Cucamonga. The company has fumed over taxes--particularly a new energy tax imposed by the city--but on tallying up their tax bill, officials acknowledged that the burden alone was not heavy enough to drive Tamco out of California. State/local sales tax on equipment: $1 million Property tax*: $543,173 Corporate income tax: $129,720 Environmental fees: $100,844 State unemployment tax**: $69,634 Rancho Cucamonga energy tax: $50,000 Vehicle license fees: $9,512 Rancho Cucamonga business license tax: $1,489 State fees for weighmasters: $335 Well water assessment: $5 Secretary of State corporation filing fee: $5 Other permits/fees: $2,140 Total***: $1,906,857 * On 60 acres, including forge, administration building
** On a payroll of $12 million
*** About 2.27% of TAMCO's $84 million in operating expenses