Liability, Tax Fairness Factors in Power Plant Decision
I am announcing my intent as a Marshall County commissioner to vote against, and not sign, the Marshall County Commission’s final document/s related to the PILOT agreement establishing government ownership of the proposed Moundsville Power, gas-fired turbine generating plant south of Moundsville on the Honeywell- owned property next to also Honeywell-owned former Allied Chemical & EPA “‘brown site.'”
In June of 2013 I was told what a PILOT (Payment In Lieu Of Taxes) agreement is when informed Moundsville Power was considering a plant location in Marshall County. I, like countless constituents and other politicians that have discussed this issue with me, have thought a “‘PILOT'” contract/agreement is in reference to a facility being an experimental/test project. Sure, this is the original, common standard definition of a PILOT, but in this relatively new context we are exploring today of the word “‘PILOT'” is actually a way to negotiate extremely lower property taxes than other similar businesses pay by law, for in this case a period of 30 years. In the case of Moundsville Power, they will only pay over the next 30 years between $30 million to $40 million total to the county. Moundsville Power without the PILOT would pay over the next 30 years for an equivalent normal property tax just under $200 million dollars to the county, not considering probable major inflation of property value.
A similar business that has been a loyal supporter and private business partner in Marshall County throughout my lifetime, AEP, will be forced to continue paying 100 percent of their property tax during this same 30-year period, on an equivalent amount of property. For comparison purposes, without increases for normal inflation, that would be the full $200 million in property taxes, vs. Moundsville Powers $30 million to $40 million total. This PILOT relating to the proposed Moundsville Power is a document that names a government body (Marshall County Commission) as the “owner” of what should be in my opinion a private-sector business venture. This results in a second negotiated “Payment Schedule and Lease” agreement with said Moundsville Power LLC to legally avoid normal property tax payments which other competing businesses are required by law to pay over the same 30-year PILOT period, placing other said businesses in a position of unfair competition. How can this ever be considered fair and acceptable? I have not supported this Moundsville Power project since learning the true definition of this type of PILOT.
How is a PILOT tax incentive plan any different than any of the spectrum of other incentives out there? Unlike any other limited tax incentives available to encourage new business investments in Marshall County, under the rule of a PILOT agreement the Marshall County Commission will take on the obligations of not just being an “owner in name only” as commonly mis-referred to during this project, but will be a “real owner” in very real terms of taking on the very real legally binding, potentially unlimited liability. I have been repeatedly assured that Marshall County and the Commission will have the best liability coverage available if this deal is to be finalized. Just after one of those liability assurances, I asked an unrelated question about routine maintenance schedules and was denied this basic information, being told it could ironically be a potential liability issue for the county and Commission it the future, which may be legally true, but is not an answer that makes me rationally believe that there will ever be enough liability protection for the county and Commission.
I have personally been denied speaking with management of other electric utility companies to explore their opinions of this project, and reasons for their companies not building a similar gas-fired electric generation plant in the area, because of their personal liability concerns, again increasing my liability concerns. I requested basic vetting info about all investors of Moundsville Power months ago and have yet to receive it . I have not been exposed to any basic projected gross and net financials with or without a PILOT, to have hard numbers as to the viability of success of this partnership, which is a bit of info that is normally studied in depth by “business venture partners” following “best Practices.” An example would be a bank considering lending money to a new business and requiring every bit of information about what the bank’s money is going to be invested in, or potentially lost.
I believe said liability in a worst- case scenario could potentially crush Marshall County financially for generations to come. If you are thinking that an all-destructive, devastating liability scenario could never happen, just reflect back a handful of months ago to the Freedom Industries water crisis in the greater Charleston, W.Va., area earlier this year. Like Freedom Industries, Moundsville Power LLC, plus its related financial partners, liability insurance partners, etc. could all go bankrupt and walk away from a total disaster. Another recent example to refresh short memories is the federal bailout of the largest U.S. banks, GM, and Chrysler, all companies that most thought could also never fail. I consider it highly unlikely that the federal government, with over $17 trillion in debt, will have any resources to come to our aid to bail out the county in a worst-case scenario. Actually, ironically, the federal government, via the current out of control EPA, could be the cause of a financial disaster scenario with Moundsville Power being next to an EPA reclaimed “brownfield” site. The EPA recently shut down the Long Branch Mine in southern West Virginia, after the mine had invested around a billion dollars for improvements, with all proper permits secured. The EPA did not honor, as in the past, the Long Branch Mine permits. When considering new future EPA standards, one is logically led to conclude the same policy could potentially be applied against Moundsville Power in years to come, with the EPA condemning the site, leaving Marshall County to potentially pay the extreme expense of clean-up of the site. Marshall County could inherit the unprotected liability by default and become the next Detroit. Detroit, just to remind you, is now in bankruptcy and liable for over $3 billion in debt.
Marshall County is currently experiencing its best financial times ever, with only a little over $17 million dollars in revenues, balanced out by around the same in expenses, annually. We could never – repeat never – repay potential unprotected liability. Marshall County is being blessed with an industrial construction boom, and I assume the construction of Moundsville Power would utilize very few local construction workers whose trades would apply to this type of construction, and I believe if a gas-fired plant is a viable, profitable business model that other established utility companies will come and build without a government-owned PILOT, making jobs and paying needed fair taxes to West Virginia/ Marshall County.
A worst-case scenario would force property taxes to become extremely high by today’s standards, which would in turn encourage businesses and individuals to leave Marshall County like rats from a sinking ship. I consider the worst-case scenarios as highly unlikely, but yet real possibilities, therefore find it illogical exposure for Marshall County to accept this potential risk.
West Virginia’s/Marshall County’s historic and current main life-blood of our revenues and economy depends on the production and related revenues derived from coal and gas products. To further sustain and enhance that revenue stream, West Virginia/Marshall County needs to use/consume as much of that coal and gas as end second-level users within West Virginia/Marshall County to generate, use, and export affordable end-consumer ready electric energy. One of the repeated arguments supporting the Moundsville Power recently is that “no traditional private sector power plants, like the AEP Mitchell Plant in Marshall County, will ever be built in West Virginia from here on out … all future power plants will have to use PILOT agreements with government ownership.” I find this “government ownership” model as totally unacceptable in my United States, the home of free markets. The total lack of concern for fairness of taxation when comparing businesses required to pay drastically different tax rates is also unacceptable. I view the parallel tax laws applied unequally created by the West Virginia legislative leadership in the House of Delegates, state Senate and executive branch by creating the option of unfair PILOTs, as a tragic failure to reform/modify all of the old taxes, fees, regulatory, legal, permitting, etc. expenses that make West Virginia uncompetitive with other states and keep us often on the bottom economically of most national lists when related to being business friendly.
Whimsical parallel tax structures such as the model applied to AEP vs. the PILOT model applied to Moundsville Power, that treat equals differently by applying different rates and requirements are unfair and morally wrong. I find it disturbing that governing bodies accept the use of an unfair, unequal tax plan by utilizing PILOT agreements. Government revenues are needed to operate, but those revenue costs must be competitive, fair, equal, and be applied the same to all.
I am a strong “free market guy” because of what practiced free market economic philosophy has done to make the United States the economic leader of the world. I begrudgingly voted for the original PILOT (Payment In Lieu Of Taxes) document after encouragement to allow time for others to explore aspects of potential benefits to Marshall County and allow the time critical process to move forward, but was assured by all involved that I may in the end vote against the final contract relating to said Moundsville Power project at my option.
My education on this project and related potential problems since my first exposure to this project have strengthened my opposition of the Marshall County Commission being an “owner” and taking on the potential crushing liability.
I did not run for this office for title. I ran partly because of a shared frustration with many of the all-too- common seemingly innocent, repeated government short-sighted compromises for short-term gains, ignoring our core values and basic American principles for “just this one project.” I control only one of three Marshall County commissioner votes concerning the upcoming vote on whether to sign the final related agreement. Two or three votes will determine the fate, either way, of the proposed PILOT with Moundsville Power. This is my line in the sand that may disappear as quickly as the next incoming wave may wash it away, but I have drawn that line in the sand anyway. This is my public announcement of intent to exercise my said option to vote against the Marshall County Commission’s government ownership of Moundsville Power under a PILOT agreement for the next 30 years.
I would welcome Moundsville Power LLC to reconsider not using a PILOT agreement with government ownership, but return to being 100 percent private sector owned fair & equal business partner in Marshall County, W.Va. As I’ve been emphatically told, and agree, this is “the best site for this plant in the United States.”
Miller is a Marshall County commissioner.