Officials: Billion-dollar tax break for Beaver County cracker plant will be costly
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The billion-dollar tax break being used to lure Royal Dutch Shell's petrochemical facility to Beaver County would cut significant property tax revenue for the local municipality and school district.
Central Valley School District would lose $275,000 in property taxes if the land for the proposed ethane "cracker" plant becomes a tax-exempt Keystone Opportunity Zone. Potter would lose about $40,000 in property tax revenue -- about 7 percent of the annual budget for the rural township.
Those dollar figures represent the property taxes currently paid by the Horsehead Corp., officials told members of the House Appropriations Committee during a hearing Tuesday at the Community College of Beaver County in Monaca. The zinc smelting company has remaining operations that cover about 300 acres and still have about 600 employees.
If the Horsehead land is eventually used to house the Shell project, businesses there would be exempt from state and local property taxes for 15 years under legislation proposed by Gov. Tom Corbett and passed by the Legislature in February. An additional 25-year tax break on ethane purchased for the facility was passed in June.
The exemptions are expected to exceed more than $1 billion.
A multiyear break on taxes means "a full generation of Potter Township residents" will pay property taxes before businesses in the opportunity zone do, township Supervisor Rebecca Matsco said.
Township officials were quick to endorse the aggressive wooing of the facility, which would process gas and liquids extracted from the Marcellus Shale formation and, officials say, inspire spin-off companies and affiliates to set up shop in the area. But the boom in development wouldn't come immediately, and the loss of tax revenue would, they said.
Shell has signed a land-option agreement with Horsehead, but officials and Mr. Corbett have said the decision to build in Pennsylvania is not final. A formal decision is expected by the end of the year.
The Keystone Opportunity Zone plan would force the municipality and school district to do more with less, causing a loss in revenue just when extra money is needed to accommodate the services needed by the proposed plant and its employees.
Supervisors managing the $550,000 budget for the township of 540 residents are wondering how they'll pay for the water and sewer updates that will be needed for the facility, Ms. Matsco said. The $40,000 now generated by Horsehead property taxes is enough to fund the volunteer fire department for the year, and more than eight times the amount used for the township's annual recreation budget.
A local services tax that could be lost under the opportunity zone plan would cost the township an additional $60,000, she said.
Horsehead has said it is moving a majority of its operations to North Carolina, so the area would be losing much of those property tax payments either way. But Ms. Matsco pointed out that nearly any replacement company -- except for Shell -- would pay property taxes at the site.
Legislators asked Ms. Matsco if the township had sought help from Shell in shouldering the cost in a plan similar to the one created when casinos were legalized in the state. Under that law, the municipality and county hosting the casino received between 1 and 2 percent of gross revenue from table games and slots, said state Rep. Joseph Markosek, D-Monroeville, ranking Democratic of the House Appropriations Committee.
Ms. Matsco said it had "seemed premature" to ask Shell for money but that she'd take the lawmaker's advice back to her colleagues.
The Central Valley School District, which formed in 2009 after the merger of the Center Area and Monaca districts, already has two Keystone Opportunity Zones in its area, for Walmart and Target stores. The $275,000 that would be lost with the Shell zone equals nearly 1 mill of taxes in the district, which currently has a tax rate of 47.5 mills and a budget of about $30 million, district Superintendent Daniel Matsook said.
Since 2008, the school district has had a mercantile tax that allows it to collect a maximum of $200,000 from about 230 businesses in the Center and Monaca regions. Mr. Matsook asked that the revenue cap on the mercantile tax be removed to help pay for expansions at district facilities as more workers and their families come to the area.
Two out of four schools are at capacity, he said.
Gas executives say petrochemical facilities often spawn spin-off companies in the surrounding area. For example, one legislator said he saw a forklift repair shop near a Shell cracker in Louisiana.
But the district has met the $200,000 limit on the mercantile tax revenue from existing businesses for the past several years. That means Central Valley wouldn't see any additional revenue from new businesses brought by Shell.
In fact, new businesses may increase the amount of mercantile tax refunds that the district has to send businesses once the $200,000 limit is breached, Mr. Matsook said. About 25 percent of those refunds are for less than $1.
"It'll cost us more to lick the stamps," Mr. Matsook said.
First Published August 29, 2012 12:00 am