Morgantown Dominion Post – Over the past several months, the Monongalia County Commission has been negotiating a “payment in lieu of taxes” (PILOT) deal with Longview Power LLC to build a gas-fired power plant. PILOT agreements are property tax abatements where corporations agree to make annual payments to local governments instead of paying the property taxes they would normally owe and that other businesses in the jurisdiction pay. These fixed payments are generally a small fraction of what would have normally been paid in property taxes, and research shows that business tax incentives rarely pay for themselves by providing net positive tax revenues for communities. Read op-ed here.
While neither the state nor Monongalia County has disclosed the potential forgone revenue from the agreement, rough estimates calculated by looking at what Longview would be paying if it paid the same tax rates as other businesses in Mon County show that the estimated tax abatement for Longview’s proposed gas-fired power plant is $275 million over the 30 year life of the PILOT deal. And this would represent Monongalia County’s second PILOT agreement with Longview. The county is currently several years into another 30 year tax abatement for Longview’s coal-fired power plant, which is estimated to reduce their tax liability around $562 million. In total, the value of the two PILOT agreements translate into over $670 million in potential lost revenue for Monongalia County, its residents, and our public school system, which receives about two-thirds of the county’s property taxes.
In light of the COVID-19 public health and economic crisis that is now facing our county, state, and country, governments are facing serious revenue shortfalls. While the county commission is estimating a loss of $1.8 million in tax revenue through June 30, the impacts of the crisis on the property tax revenues upon which our county’s public services rely, will be felt for months and years to come.
Even in better economic conditions, poorly designed business incentives threaten local revenues and public services, turning a tool aimed to promote economic growth into service cuts and tax increases on residents. In the midst of a potentially lengthy recession, business tax incentives can become economic disasters for local governments, public schools, and tax-paying residents.
While other businesses and taxpayers have their property taxes re-assessed each year, Longview is being given a fixed deal for the next 30 years that fails to take into account changing economic conditions or environmental regulations. The less Longview pays, the more that other businesses and residents must pay to fund schools and public services.
While proponents argue that tax abatements are necessary to incentivize a business to locate in a community and that any payments received via the PILOT agreement are a net gain, that fails to take into account the public costs to the community. Roads, fire and police protection, public services, and water and air quality are all new costs that will be incurred and must be taken into account in any cost-benefit analysis.
This moment requires that local governments protect critical revenues and ensure that the cost of the economic crisis is not unduly borne by Monongalia County residents. In light of current economic conditions, the county commission should reconsider moving forward with this tax incentive or, at the very least, produce a cost-benefit analysis in light of changes in the economic and energy markets.
Businesses must pay their fair share, and a PILOT agreement that confers special tax treatment on a single corporation without proving net economic benefits for the community is not the right way forward.
