CHARLES TOWN — Opponents of a controversial $150 million manufacturing plant being built in Ranson are cheering a decision last week by a Jefferson County Circuit Court that suggested that a tax relief agreement the company is relying on to avoid paying about $10 million in property taxes is flawed.
In a 10-page ruling issued Thursday, Circuit Judge David Hammer called “defective on its face” the payment-in-lieu-of-taxes, or PILOT, agreement, signed by the Jefferson County Commission, the Jefferson County Board of Education, the city of Ranson and the county assessor and sheriff on behalf of the mineral wool facility by Denmark-based insulation maker Rockwool. Hammer said the absence of the entity that lets Rockwool sidestep its tax burden — the Jefferson County Development Authority — undermines the agreement, which grants Rockwool millions of dollars in tax relief for 10 years as it constructs and puts online its factory on the outskirts of Ranson, near Kearneysville.
Writes Hammer: “Remarkably and despite purporting to bind the JCDA, 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.”
Jefferson County Vision, the nonprofit group formed in 2018 that brought the case against the PILOT, hailed Hammer’s ruling and called on the jurisdictions that participated in the agreement to now reject it.
“The Judge made it clear that Rockwool PILOT does not bind our community to this project. It is a mere proposal, by public officials who have since resigned in disgrace, to subsidize heavy industry by our schools,” the group said in a statement. “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.”
Not so fast, says Dan Casto, a former member of the board of directors of the Development Authority. Casto said the board did vote to approve the PILOT and he made the motion that called for the vote. Indeed, board minutes confirm that the then-21-member board voted unanimously on Aug. 22, 2017 to approve the agreement with Rockwool. The minutes use the JCDA’s code name Project Shuttle for the Rockwool factory project, even though Rockwool’s plans to build the factory were publicly announced July 5, 2017.
Casto said JCDA President Neil McLaughlin is already authorized by the board to sign the PILOT to implement it.
“I believe that Rockwool and the JCDA could go ahead and sign the same PILOT agreement that we approved in August of 2007 without any further board action,” Casto said.
Hammer should have been informed during the court proceedings that the JCDA board already voted to approve the PILOT, Casto said, adding if the judge was not informed about the vote, that would have been a trial error.
As part of the agreement, the Development Authority would be the owner of the land on which Rockwool’s factory is being built and would lease it back to Rockwool, which would take ownership of the property after nine years. As a tax-exempt government agency, the JCDA would not owe property taxes on the factory property.
The agreement lets Rockwool pay just over $2 million in real estate taxes through 2029, and avoid paying personal property taxes on equipment until it would pay an appraised “salvage value,” based on 5 percent of 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.
In 2017, when the Rockwool factory project was announced, Jefferson County was receiving about $8,300 in annual property taxes from the former owner of the Rockwool factory site, according to county tax records.
As part of its complaint, Jefferson County Vision also wanted the court to declare PILOT agreements unconstitutional, a scenario that would have been catastrophic to state economic development efforts. 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 said the PILOT, by purposely using the development authority to shield Rockwool from paying taxes, illegally circumvents those constitutional requirements.
Hammer pushed back against that interpretation, recognizing instead the “broad, discretionary powers” that the West Virginia Constitution and the state Legislature provide to area economic development authorities. As part of his ruling, he pinned his dismissal of JCV’s complaint on the inability of the court to know whether the terms of the PILOT would be agreed upon in the future. Wrote Hammer: “But when relief is sought pursuant tot he 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.”
Casto said if the current JCDA board moved to invalidate the PILOT in the wake of Hammer’s ruling that could open the county to legal liability from Rockwool. The company could legally argue that it relied on the approved PILOT when it moved forward with the construction of its factory, he said.
Former JCDA Executive Director John Reisenweber said he sought the approvals of the county commission and board of education and the others in the interest of open government. He said the JCDA never would have negotiated a tax-relief agreement with any corporation without support from the county commission. The JCC needed to approve the PILOT because the JCDA has no taxing authority, Reisenweber said in a phone interview.
Reisenweber said the board of education, which was not required to approve the PILOT, was asked to sign the agreement to show its support for the project. Allowing the BOE to approve the agreement also informed them of the tax revenue the Rockwool project would generate for the school system, he said. According to an estimate given to Jefferson County Schools, the PILOT will allow Rockwool to avoid paying about $28 million in state real estate and personal property taxes through 2029.
Rockwool spokesman Michael Zarin called Hammer’s decision a win for recognizing the ability of development authorities to offer PILOT agreements as economic incentives.
“We are fully confident that relevant authorities will deliver the promised economic incentives,” Zarin said.
Lyn Goodwin, the JCDA’s acting executive director, said the development authority is pleased Hammer dismissed the lawsuit so that the Rockwool project can move forward.
“We’re pleased that the PILOT case was dismissed,” she said. “We’re moving forward.”
Goodwin said the JCDA board will receive a legal briefing on Hammer’s ruling at its next meeting on Aug. 29. Martinsburg attorney William Rohrbaugh will provide the legal explanation.
Hammer is soon expected to rule on another complaint by JCV, this one challenging a 2017 rezoning approval by the city of Ranson for 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 rezoning notices for the Rockwool factory site and then voting again on the application.