Washington mushroom grower seeks tax relief for new farm

Ostrom's Mushrooms Farm President and CEO David Knudsen testifies Feb. 16 before the House Finance Committee in Olympia. The farm is seeking a sales tax exemption to help it move from Lacey in Thurston County to Sunnyside in Yakima County.

OLYMPIA — A Western Washington mushroom farm, hemmed in by suburbia, is seeking a tax break estimated to be worth roughly $1.8 million to help it move east of the Cascades to the Port of Sunnyside in Yakima County.

Ostrom’s Mushrooms President David Knudsen said the farm was put down 50 years ago in a forest in Lacey, near Olympia. Now it’s surrounded by homes, stores and a school. The mushrooms are grown indoors, but making the compost to grow the mushrooms in leads to odors, and complaints.

“It’s a fully developed suburban landscape,” Knudsen said. “It’s just not the right place for a mushroom farm anymore. We need to get out of there.”

Ostrom’s, the state’s largest mushroom grower, must expand to remain competitive with British Columbia farms, Knudsen said. The company, which also considered moving to Umatilla County in Oregon, has picked Sunnyside for a $35 million farm.

The project, however, may hinge on whether the Legislature exempts most building costs from the state’s sales tax, the company’s lobbyist, Brian Enslow, said.

Ostrom’s originally estimated the Sunnyside farm would cost $25 million. Costs have risen, though. The company is also concerned that a weakening dollar will continue to increase the cost of buying the latest mushroom-growing technology from the Netherlands.

“We are in a very tentative situation. We believe it’s imperative to get this (tax) assistance,” Enslow said.

Yakima County legislators who represent Sunnyside, Rep. Bruce Chandler and Sen. Jim Honeyford, have introduced the tax exemption. Ostrom’s anticipates initially creating about 230 jobs at the port, with the room to expand to 400 jobs.

“In Yakima County, we still have space for the development of agricultural enterprises,” Chandler said.

Enslow estimated the exemption proposed by Chandler and Honeyford would apply to $29 million of the construction costs. Since the state sales tax is 6.5 percent, the company projects saving approximately $1.8 million. The exact savings would depend on how the Department of Revenue interprets any tax law passed by lawmakers.

If the finances line up, the company could break ground April 1, Knudsen said. Construction would take about a year, he said.

At a hearing Friday in front of the House Finance Committee, the Port of Sunnyside and the state Department of Agriculture supported the company.

A mushroom farm and its year-round agricultural jobs would be welcomed, the port’s executive director, Jay Hester, said.

Ostrom’s Mushrooms has been operating in Washington since 1928. The company closed a mushroom farm in Whatcom County last year, leaving it with the Lacey operation. According to Ostrom’s website, the company produces 13 million pounds of mushrooms a year.

“This farm has a longstanding place in our state,” said Laura Butler, a senior adviser to the agriculture director. “Encroaching urban growth in its current location has prevented this farm from modernizing and expanding its current operations.”

Lawmakers have previously exempted or deferred sales taxes to encourage construction. The favored projects have included warehouses, grain elevators, farmworker housing, anaerobic digesters at dairies, an automobile museum and the football and baseball stadiums in Seattle.

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