Consider the Longview II PILOT Agreement for New Power Plant

By Kelly Allen, WV Center on Budget & Policy, December 10, 2019

While local government agencies have not disclosed the forgone revenue estimates from the Longview I or II PILOT agreements, we can estimate the value of the tax expenditure by looking at what Longview would be paying if it paid the same tax rate as other businesses in Monongalia County.

PILOT Agreements in West Virginia Lack Transparency and Are Often Unnecessary —
-Neither the state nor the county report on how much property tax revenue is lost each year to PILOTs and other business tax incentives.
-There is no evaluation process for determining that PILOTs have provided a net good for residents and taxpayers.
-Research suggests that between 75-98% of the time, business tax incentives do not affect a business’ decision on where to locate.
-Even when they do tip a location decision, they rarely pay for themselves by providing net positive tax revenues.
-Poorly designed business tax incentives threaten public services, turning a tool said to promote growth into an economic disaster.

There are best practices for ensuring transparency and accountability when PILOTs are done —
✓ Disclose the forgone property tax revenue and require an evaluation of all PILOT agreements to ensure a net positive taxpayer benefit.
✓ Give school boards decision-making authority to approve all agreements as they are the most impacted by loss of property tax revenue (2/3 of property taxes go to local schools).
✓ Enlist a neutral or third-party to conduct a cost-benefit analysis to ensure that the deal is worthwhile over the short- and long-term life of the project. (Our only current analysis was paid for by Longview).
✓ Include local hiring provisions, pay and benefit standards, and clawback/recapture provisions if the developer fails to fulfill their obligations.
✓ Grant abatements only to areas in need of development and to those that maximize beneficial outcomes (infrastructure improvements, quality jobs, overall revenue gains).
✓ Limit the length of the abatement to the minimum necessary to attract the development sought.

At the very least, PILOT agreements in West Virginia, especially those where almost all of the economic impact happens during construction, like Longview Power, should require that the new tax revenue from the project exceeds the property tax abatement and that there are job creation and retention requirements.

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See also: PILOT Agreements Cost State Millions in Tax Revenue: An In-Depth Look at Longview Power Plant, Ted Boettner, October 15,2019