Rockwool case could set new West Virginia precedent on taxes (WV News)

December 16, 2018

RANSON — The outcome of a legal battle over an insulation production plant in the Eastern Panhandle could set a new precedent regarding the state’s payment in lieu of taxes, or PILOT, practices.

The Denmark-based company Rockwool plans to build a $150 million stone wool manufacturing plant in Ranson upon invite from the state and the Jefferson County Development Authority. Ground was broken on the site during the summer.

But a nonprofit organization called Jefferson County Vision formed in opposition and has filed multiple lawsuits to stop the plant’s construction.

The newest suit, filed in November, challenges the constitutionality of a PILOT agreement with Rockwool.

Christopher Kinnan, a member of Jefferson County Vision, said Rockwool is the only business in the county that is enrolled in a PILOT agreement, and it isn’t fair to the other businesses.

Jefferson County Vision has challenged the state’s PILOT practices, citing Article 10-1 of the state Constitution, which outlines taxation and finance.

“They are unfair to everyone else who pays their fair share of taxes,” Kinnan said. “Rockwool’s PILOT deal is the spark, but Jefferson County Vision is fighting for the rights of all West Virginia taxpayers with this lawsuit. We are all equal before the law.”

Michael Zarin, vice president of Rockwool, said Jefferson County Vision filed a previous lawsuit in September against the Jefferson County Development Authority on the grounds that the authority acted improperly as a utility in relation to the water line to the area where the Rockwool facility is being built. The judge denied Jefferson County Vision’s request for an immediate injunction in that case.

However, Zarin said the suit challenging the state’s PILOT program could have ramifications going beyond Jefferson County.

“In addition to Rockwool, we understand there are some 40 other tax incentive agreements of the same nature currently in force in the state,” Zarin said. “My understanding is that as more people in the business community become aware of the lawsuit, they’re expressing concerns about the impact the suit could have on the state’s competitiveness if it were to succeed.”

Zarin is not alone.

“We would be dead in the water for economic development and recruitment,” said Steve Roberts, West Virginia Chamber of Commerce team captain for leadership and transformation, regarding the potential loss of the PILOT program if the courts deemed it unconstitutional.

Roberts said the reality is that other states are able to offer more incentives for large businesses, such as paid staff training or even cash. Loss of the PILOT program would mean that many business prospects which might come to West Virginia could be lost, he said.

Roberts said that no matter what happens, the Legislature should double down on ways to make the state more attractive and offer more incentives for businesses because, as it stands, there’s little to fill the void that would be left if the PILOT program is eliminated.

He said West Virginia is the only state that has seen a population decline since the 1950s. Jobs in West Virginia aren’t being created at the same pace as other states, but doing so is vital for the sake of Mountain State revenue since jobs form the meat of the tax base. Roberts said he was surprised by the opposition to Rockwool in Jefferson County, given that Procter & Gamble set up shop in nearby Berkeley County.

Bill Bissett, president and CEO of the Huntington Regional Chamber of Commerce, said that as his region has experienced a decline in population, attracting job creators is more important now than ever, and the state should use what assets it can.

He expressed concern that the events unfolding in Jefferson County could create a wider impression that businesses are unwelcome in the Mountain State. He too said getting rid of the PILOT program would make the West Virginia less competitive.

Rebecca McPhail, president of the West Virginia Manufacturers Association (WVMA), said that without significant changes to current tax structure, the PILOT program is critical to the state’s economic development efforts. There was a push in the state Legislature to eliminate the business and inventory tax during the last session; that push was supported by Chambers of Commerce and other business leaders but did not happen.

“Without major changes to West Virginia’s tax on machinery and equipment, the loss of the PILOT program could dramatically reduce the opportunity to grow investment in West Virginia and create and retain jobs,” McPhail said. “The WVMA feels that the state’s application of machinery and equipment tax on manufacturers, as one of only a few states that applies this tax, puts the state at a significant disadvantage for new manufacturing investment and retention of existing companies.”

McPhail also noted that the West Virginia Development Office and county-level economic development entities have relatively few tools at their disposal in spurring manufacturing growth, necessitating the PILOT program.

State Sen. Mike Romano, D-Harrison, also sits on the board of the Harrison County Economic Development Corporation. He worked to bring to his county a natural-gas-fired power plant that entered into a PILOT agreement through which $600,000 is to be paid to the county each year in lieu of taxes. He said there is a similar arrangement for a Brooke County gas-fired power plant in which about $750,000 is to be paid to that county.

“While certain areas give up future property taxes in order to attract unique industries, such as the natural gas power plant, the reality is that natural gas power plants would not have come to our state without the availability of the PILOT program,” Romano said.

He said that although property tax revenues are reduced through PILOT agreements, tax revenue is still generated by the use of natural gas locally and the creation of more jobs.

Romano noted that one perk of a PILOT agreement is that money generated from it doesn’t go to Charleston before it’s recirculated. The revenue stays local and is spent locally, often on county school districts.

Like Roberts and McPhail, Romano said the PILOT program offers an incentive that West Virginia otherwise couldn’t provide in view of surrounding wealthier states.

He added that it’s not uncommon for opponents of certain businesses or even business rivals to use the courts to stop competitors from locating in the state. One example was the legal challenge to West Virginia’s gas-fired power plant projects by some coal interests.

As for the potential negative effects of ending the PILOT program, Kinnan said the state needs to focus on making itself more attractive to all businesses, not just a few large companies.

He explained that opposition to the Rockwool facility stems from multiple reasons, such as changed zoning, air quality concerns over building an industrial facility near local schools and an approval process in which PILOT details weren’t shared with the public in advance.

Furthermore, Kinnan said Jefferson County already has low unemployment rates because of growth in the technology, health-care, government and information serves.

He noted that the Rockwool facility might be a better fit elsewhere in the state because Jefferson County’s economy is more attuned to that of the Washington, D.C., metro area and a heavy industrial facility isn’t a proper fit.

Zarin said Rockwool remains committed to building the plant regardless of the outcome of the challenge to the PILOT program.

The company filed a motion late Friday to dismiss the Jefferson County Vision lawsuit challenging the PILOT agreement with Ranson and the Jefferson County Commission, Board of Education, sheriff and assessor. In the motion, Rockwool claims that the “Plaintiffs’ Complaint is a collection of political grievances rather than legal claims. This Court cannot grant relief for political grievances, however, and must dismiss Plaintiffs’ Complaint.”

Staff writer Conor Griffith can be reached by at 304-395-3168 or by email at [email protected]