Property Tax Incentives Growing Costly
An article in Sunday's in Wheeling's Intelligencer/News Register highlighted the growing cost of the state's business property tax incentives. The Marcellus Gas and Manufacturing Development Act of 2011 created a special tax preference for manufacturing facilities involved with natural gas liquids products (the famous "cracker bill" was an expansion of this legislation).
The tax incentive gives a property tax break to businesses that make a capital addition of at least $10 million to a manufacturing facility with an original cost of $20 million, if the facility processes natural gas. The incentive allows the capital addition to be appraised at its salvage value (5%) for 10 years for property tax purposes, rather than at the normal 100% of market value. This dramatically lowers the property tax bill of a qualifying business.
According to the fiscal note on the bill, the tax incentive "will have little or no direct effect on Property Tax revenue" and that any potential forgone revenue is "estimated to be less than $500,000."
While the fiscal note projected minimal forgone revenue, Marshall County is missing out on millions already, with its booming natural gas industry. According to the Marshall County Assessor, $916 million worth of construction will qualify for the incentive in 2014. Normally, $549.6 million (60% of appraised value) would be taxable. Instead, the assessed value will only be $27.5 million, due to the salvage value treatment.
So, instead of paying $12.1 million in property taxes, the affected companies will only pay about $603,000. That means Marshall County will lose out on over $2 million in property tax revenue, while Marshall County Schools will miss out $4 million from their regular levy, and $4.7 million from their excess levy. And the forgone school revenue means the state is paying an extra $3.3 million through the school aid formula.
The development of the Marcellus Shale hasn't been without its costs, and those costs can't be addressed if those benefiting from the resource don't help pay them. And what was once thought to be a minor tax break is now costing just one county millions of dollars in lost revenue. And this tax incentive is going to companies worth billions of dollars, who are coming to West Virginia because we have a resource that they want, not because of a tax break. A $12 million tax break isn't going to be the deciding factor for businesses that have already made billions in investments in the state, and want to be located where the natural gas is located. However, it can be the difference in whether or not we balance the budget, or keep our libraries open, or hire new teachers.