CHARLESTON, W.Va. -- A tax break that Gov. Earl Ray Tomblin rushed through the Legislature to try to lure a natural gas "cracker" plant to West Virginia could cost the community where such a facility locates $300 million in revenues for schools and other local government efforts, according to an analysis released Friday.
The reduced property taxes allowed under the bill would save the developers of any cracker facility an average of $12 million per year over the next 25 years, according to a review by the West Virginia Center for Budget and Policy.
Center policy analyst Sean O'Leary examined HB4086 and an accompanying financial note by the state Tax Department that put the costs of the cracker tax credit at $0.
"There are several problems with the reasoning behind the $0 fiscal impact, and it is likely that there will be a significant fiscal impact if a facility is built, and takes advantage of the tax incentive," O'Leary wrote.
Under the bill, any company that invests at least $2 billion to build a cracker plant in West Virginia would receive a 25-year tax break. The legislation allows the cracker's manufacturing property to be assessed for tax purposes at 60 percent of its salvage value, which is 5 percent of its original cost.
With this tax break, the assessed value of a $2 billion cracker plant would, with depreciation, fall from $1.14 billion to $362 million over the course of the 25 years, O'Leary projected.
Over the 25 years, the facility would pay an estimated $32.6 million in property taxes with the incentive in place, compared to $335.8 million without it, the analysis said.
"The substantial amount of revenue forgone could have significant implications for local governments and schools, which rely heavily on property tax revenue," the report said.