Two bills to change how West Virginia’s natural resources are valued for property tax purposes are moving through the Legislature. Proponents say the measures — which would probably lower the taxes companies pay — are necessary to address statutory and constitutional requirements. But it could also reduce the tax money that goes to counties, and many local officials are balking at the price tag.
“There’s a lot of legislation this session that would impact counties financially, and it seems like it’s all coming at once,” said Jennifer Piercy, executive director of the County Commissioners’ Association of West Virginia. “Counties want to be involved in these conversations, because we’re directly affected.”
Piercy said many counties are already struggling financially. Most have seen declining populations that lead to less property tax revenue, on top of high jail costs and losses driven by the pandemic, such as by dips in hotel-motel tax revenue, she said.
“I think that the fundamental question here people have to ask [is], ‘Are the large companies going to pay these taxes?’” said Delegate David Pethtel, D-Wetzel. “Or is the county commission and school board? Do they have to raise the levy rate and put this back on individual property homeowners?”
State property must be assessed equally and uniformly, per the West Virginia Constitution. According to state law, property must also be assessed at its “true and actual value.” A pair of industry-supported bills have been introduced, sparked by concern that these standards are not being met. House Bill 2581 would change the way the state’s oil and gas wells are taxed, while House Bill 2493 would change coal property’s taxation. The bills have been gaining momentum: both have passed the House of Delegates and still have a chance of passing the Senate before the session ends late Saturday.
The state Tax Department estimated that a former version of the oil and gas well bill would have cost counties more than $9 million total in its first full year, with most of the losses congregated in a handful of counties.
A fiscal note for the bill says that some losses to county school boards would be offset by the state School Aid Formula, which is funded through the state’s general revenue. But local school boards would still see an overall decrease of $5.2 million for schools alone and would cost the state $1.1 million in the 2023 fiscal year under the Public School Support Plan.
But the decision over changes has been delayed. An amendment approved by the Senate Judiciary Committee on Tuesday afternoon delays any changes, leaving the role of developing such a rule to the state Tax Department. The bill has now been sent to the Senate Finance Committee for consideration.
Wetzel County Assessor Scott Lemley called the amendment a victory for counties.
“Now the state Tax Department will be able to work on methodology in a formula that will be able to properly come up with a true and actual value that’s equal and uniform for all producing oil and gas wells in the state of West Virginia,” he said.
Lemley’s county is projected to lose $886,454 with House Bill 2581 alone. He said these losses could lead to staff and program cuts in schools and reduce what the county commission could provide through projects and services.
Piercy said she hopes the adopted amendment means counties can participate in the plan discussion.
But for the bill’s lead sponsor, Tuesday’s committee decision was a disappointment.
“[The bill] was the product of months and months of work with a lot of different groups,” said Delegate Dianna Graves, R-Kanawha.
Graves said she believed the Tax Department cost estimate was the “potential worst case scenario,” and she worried the amendment would be worse than an unpassed bill.
“So not only did we completely erase all of the benefits of 2581, we’re in a worse position now than we’ve ever been because the state Tax Department had been willing to work with us on 2581,” she said.
More county concerns
House Bill 2493, which would change the tax valuation of coal, is another area of concern for leaders like Piercy and Lemley. It was pending in the Senate Finance Committee as of Tuesday afternoon.
That bill, if passed in its current form, could cost counties more than $12 million total for the 2022 fiscal year according to Tax Department estimates. Some of the largest losses would be in already-struggling southern coalfield counties, like Wyoming, Logan and Boone.
Delegate Terri Funk Sypolt, R-Preston, said she believed the Tax Department’s estimate was a “a very inflated number.” Sypolt, who spent 16 years as Preston County’s assessor, estimated the loss would be around $3 million divided among the counties.
“I believe this new evaluation will be a step in the right direction of getting the coal valuations to a more true and actual value of the coal valuations for the state of West Virginia,” she said.
The bill makes multiple changes to how the state determines tax values. For example, the Tax Department currently uses a three-year average for the calculation of property taxation on coal. HB 2493 shortens that to the most recent calendar year, which would mean counties would take a harder revenue hit during bad years for the industry.
Delegate Vernon Criss, R-Wood, the lead sponsor for HB 2493, didn’t return a request for comment.
County concerns go beyond those two bills. Piercy’s organization is keeping an eye on House Joint Resolution 3, which would put a constitutional amendment on the ballot before West Virginia voters. It would give legislators the authority to alter the property taxes on businesses’ inventory, machinery and equipment, as well as on the motor vehicle personal property tax.
Depending on how lawmakers used that authority, Sean O’Leary of the West Virginia Center on Budget and Policy said, property tax revenues for local governments could be further reduced and harder to replace.
“Local governments don’t have a whole lot of other revenue options,” he said.