Whither Symbios? Fort Collins waits

FORT COLLINS – Symbios Logic Inc. faces a difficult decision.

By the end of the year, the manufacturer of computer-logic chips, and Fort Collins’ fourth-largest employer, is expected to decide whether to:

” Remain in Fort Collins, where Symbios operates its largest facility and owns a 98-acre site next to Hewlett-Packard Co.

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” Move to Colorado Springs, where the company employs 675 people.

” Relocate to Wichita, Kan., where it employs 350 people.

” Move to Eugene, Ore., where parent company Hyundai Electronics America is building a $1.3 billion memory-chip manufacturing facility.

” Relocate somewhere else in the United States.

Regardless of which option is chosen, a new facility will be needed by 1998 to replace Symbios’ 16-year-old facility at 2001 Danfield Court, said Lea Schwartz, public-relations program manager at Symbios.

The board of directors will be looking at various options during the remaining months of 1995 and then make either a recommendation or a decision regarding the best option for the company,” Schwartz said.

The prospect of losing Symbios pleases no one.

“Symbios is an excellent company and a good corporate citizen,´ said Gina Janett, a city council member. “Nobody wants them to leave.”

Hyundai considered seven locations in Colorado, Oregon and Texas for its new chip plant. Fort Collins was among three finalists, but in the end, Hyundai chose Eugene, where the company will build a $1.3 billion computer-chip plant that will employ 900 people. The city of Eugene gave Hyundai various tax breaks, including a waiver of property taxes for at least three years, an estimated savings of $27 million. Hyundai’s chairman, Mong Hun Chung, stated in a letter to Fort Collins mayor Ann Azari that the financial incentives offered by Fort Collins were not competitive.

Symbios’ local impact is enormous. According to Larimer County assessor records, Symbios paid almost $960,000 in real estate and personal-property taxes this year. Add city of Fort Collins use taxes of $500,000, and Symbios direct tax support for the area totals $1.46 million.

If Symbios pulls out of Fort Collins, the city will lose much more than just tax revenue; it also will lose 950 jobs, and Symbios’ employees will have to decide whether to leave the city permanently or commute to comparable jobs in the Denver/Boulder area.

The residential real estate market will be affected, as former Symbios employees put homes up for sale. A sudden increase in the supply of homes on the market will stabilize or possibly decrease home prices if there is not a similar increase in the number of buyers.

The average annual salary at Symbios is $37,000. Each of the 950 primary or base jobs at Symbios affects approximately two other secondary jobs, or a total of 1,900 jobs in Fort Collins, said John Green, associate professor of economics at the University of Northern Colorado.

That multiplier translates to a potential loss in spending of $40 million to $65 million, depending on the methodology used.

A tax-incentive package was rejected by Fort Collins’ city council in April of this year, when the city was competing for Hyundai’s new memory-chip plant. Fort Collins’ tax assessments were higher than any of the taxes assessed by the competing cities.

The ensuing controversy led community leaders to examine the city’s tax structure. Roland Mower, president of Fort Collins Inc., a private economic-development organization, said the tax burden placed on companies such as Symbios is inequitable.

Mower compares estimates of personal-property taxes on new equipment required to start up different types of businesses. Using a tax-per-employee unit of comparison, Mower estimates that a retail firm would pay $65 per employee, a service company $130, a traditional manufacturer $600, and a new chip manufacturer $26,390 per employee on equipment purchased to begin production.

The cost of entry into the chip-making business is high: a minimum investment of $1 billion, said Kevin Brett, spokesman for the Semiconductor Industry Association, a trade group based in San Jose, Calif. Equipment represents $650 million, or 65 percent, of that cost.

Technological advances require chip makers to retool every three years and replace that $650 million of equipment. Traditional, “low-tech” industries do not require such frequent retooling.

In addition to the personal-property tax on equipment, Fort Collins assesses a 3 percent use tax on purchases of equipment and supplies. This means that in addition to annual personal-property taxes, every three years when a chip maker retooled with new equipment, a high use tax also would be collected.

Mower argues that the city’s cost of providing basic services [water, sewer, electricity, police and fire protection, roads, parks, etc.] is the same per employee regardless of where they work.

Yet the burden of paying for these services falls more heavily on a capital-intensive company such as Symbios than it does on less capital-intensive businesses.

Will that push Symbios away? “If Hyundai has something to say about it and it’s a bottom-line deal, I think they’re out of the community,” Mower said.

Mower recommends that the use tax be either eliminated or capped on manufacturing equipment because it generates new wealth. However, “If you capped or eliminated use taxes, where do you make up the shortfall?” asked council member Janett.

The city’s revenue stream is derived primarily from sales and use taxes. According to the city’s finance department, use taxes comprised 19 percent of the total sales and use taxes collected in 1994.

“In the months to come, the city will be evaluating the entire tax structure. We are also working on a cost/benefit model that will help us come up with a strategy that will fit Fort Collins,” Janett said. “What are the costs of expansion vs. the benefits? What are the costs of a new company relocating to Fort Collins as compared to the benefits?”

The answers to those questions will determine the fate of Symbios Logic in Fort Collins.