CHARLES TOWN – Opponents of the Rockwool manufacturing plant failed this week to convince a court that a 2017 tax relief agreement entered into between the company and several area jurisdictions and officials violated the state constitution.
In a 10-page order, Jefferson County Circuit Judge David Hammer dismissed a complaint by nonprofit group Jefferson County Vision that sought to undo a Payment In Lieu of Taxes, or PILOT, agreement between the Denmark-headquartered mineral wool manufacturer and the Jefferson County Commission, the county board of education, the sheriff, assessor and the city of Ranson. The agreement grants Rockwool millions of dollars in tax relief for 10 years as it constructs and puts online a $150 million factory on the outskirts of Ranson, near Kearneysville.
Hammer’s ruling, which was issued Thursday, noted the “broad, discretionary powers” the West Virginia Constitution and the state Legislature provide area economic development authorities.
The PILOT would let Rockwool pay just over $2 million in real estate taxes through 2029, and avoid paying personal property taxes on equipment until 2017, when it would pay an appraised “salvage value,” based on 5 percent of its book value in 2028 and 2029. Without the PILOT, the company would be taxed about $1 million annually in real estate taxes.
PILOT agreements are used by development authorities throughout West Virginia. The factory has been under construction since June 2018 and is expected to open in the fall of 2020.
As part of the agreement, the Jefferson County Development Authority would own the 194+ acres on which Rockwool's factory is being built and lease it back to the company, which would take ownership of the property after nine years. As a tax-exempt government agency, the JCDA would not owe taxes on the factory property.
In its complaint, JCV argued that state law requires fair and equal taxation, and cited Section 10.1 of the West Virginia Constitution, which reads that “taxation shall be equal and uniform throughout the state, and all property, both real and personal, shall be taxed in proportion to its value to be ascertained as directed by law.”
West Virginia University law professor Robert Bastress argued the case for JCV. Bastress and said the PILOT, by purposely using the development authority to shield Rockwool from paying taxes, illegally circumvents those constitutional requirements.
But Hammer did agree with JCV’s argument that the JCDA’s absence as a party to the PILOT agreement was a remarkable omission, and that the failure of the JCDA board of directors to sign off on it calls into question the “public purpose” that grants it the ability to exempt the project from taxation.
“Remarkably and despite purporting to bind the JCDA,” the judge wrote in his opinion, “the PILOT does not even contemplate obtaining the JCDA’s agreement … The only two essential parties to the PILOT are Rockwool and the JCDA. Absent the JCDA’s assent evidenced by a vote of its board, the PILOT is not an enforceable agreement — it is merely a proposal.”
The PILOT was signed by the Jefferson County Commission, the Jefferson County Board of Education, and the Ranson City officials, Jefferson County Sheriff Pete Dougherty and Assessor Angie Banks.
Hammer agreed with JCV’s contention that the PILOT was “defective on its face”, but pinned his dismissal on the court’s inability to know whether the terms of the PILOT would be agreed upon in the future. Wrote Hammer: “... when relief is sought pursuant to the Uniform Declaratory Judgments Act, as it is in this case, the Court’s power to declare rights, status and other legal relations depends upon the facts existing at the time the proceeding is commenced. Future and contingent events are not to be considered.”
Hammer’s decision on Thursday did not address a second lawsuit JCV has filed that challenges how Ranson officials rezoned the 130 acres on which the Rockwool factory is being built. During a hearing in June, Hammer said he was considering sending the issue back to Ranson officials to resolve. He said the city could end the dispute without admitting any error by republishing public notices for the Rockwool factory site and then voting again on the application.
Both Rockwool and JCV cheered Hammer’s ruling.
Rockwool spokesman Michael Zarin called Hammer’s decision a win for recognizing the ability of development authorities to offer PILOT agreements as economic incentives. Zarin also anticipated that any outstanding issues with the agreement would be finalized.
“We are fully confident that relevant authorities will deliver the promised economic incentives,” Zarin said.
JCV’s statement highlighted Hammer’s view that the PILOT was not valid.
“The Judge made it clear that Rockwool PILOT does not bind our community to this project,” the statement reads. “It is a mere proposal, by public officials who have since resigned in disgrace, to subsidize heavy industry by our schools.”
“With this ruling, all governmental bodies in Jefferson County are free to disregard PILOT and require that Rockwool pay their fair share of the taxes they owe to our community. This ruling is an important step towards restoring government accountability in Jefferson County.”
Without the PILOT, and assuming Rockwool would build its factory without the agreement, the school system could receive nearly $11 million in new tax revenues through 2029. With the PILOT, the school system will receive about $1.3 million in new taxes.