Listen to “Mason Levy Question Brings HB 2014 Into Focus” on Spreaker.
State Treasurer Larry Pack last week released a six-page analysis entitled Tax Impact of Data Centers on Local Communities — Mason County.
It has people talking. Good. More discussion about how HB 2014 allocates tax revenue is needed. A better understanding now will sharpen any future debate over revising the law.
The paper’s author is Mark Muchow, a former state deputy revenue secretary who now serves as a strategic analyst in the Treasurer’s Office. When it comes to West Virginia finances, Muchow is a guru’s guru. His involvement gives the analysis considerable credibility.
After spending the weekend working through the details, a few points stand out.
First, HB 2014 redirects future regular-levy property-tax revenue, including money that otherwise would flow directly to local schools. The redistribution applies to taxes generated by increases in covered property’s assessed value above the statutory base. That money is divided among county governments and designated state funds according to the percentages established in the law – state funds are allocated toward specific categories like the personal income tax reduction fund, for instance.
Second, schools may receive less than they would from the same development under ordinary tax rules. Emphasis on may. The comparison requires accounting for the state school-aid formula, which uses local property wealth to calculate a county’s share of school funding. One should not assume every redirected dollar will be replaced by state aid. Just ask a few of the state’s oil and gas counties. They’ve become rich to the point that regular levy property taxes exceeds what the funding formula provides – that incremental benefit is not replaced and certainly wouldn’t be under 2014 in terms of non-excess levy funding. Given the high values, it is certainly possible data center counties would not receive school-aid contributions under a standard regular levy paradigm, but nor would overages be in play as they are in HB 2014.
Third, HB 2014 preserves school excess-levy revenue – the bill didn’t change that structure directly. Muchow’s analysis projects roughly $90 million annually in additional excess-levy revenue for Mason County Schools from the two developments studied. These are estimates based on projects taking shape over multiple years, not guaranteed dollars arriving tomorrow. But the potential is enormous.
Keeping an excess levy in place is essential to collecting that revenue. Mason County voters will consider renewal November 3. If the levy expires without renewal, the schools will not collect those excess-levy dollars, and the developers will not owe that portion of the tax. The money would not simply move to another government account, it would never be assessed. It should be noted failure to pass an excess levy would affect all taxpayers, not simply data centers.
Fourth, the governor owes the public a clearer explanation. Does the average taxpayer understand all these distinctions? I doubt it. Do county elected officials for that matter? Also likely not.
HB 2014 is the governor’s baby. Where is his plain-English explanation of who receives the money, who does not, and why, especially for Mason residents facing a levy question?
Pack deserves credit for putting estimates before the public. His work helps voters understand what is at stake. The governor should be leading that effort. Officials say that hasn’t happened.
E-mails to Governor Morrisey’s office seeking comment were not returned.
Beyond those four points lies a larger fundamental question: Is HB 2014’s diversion of revenue constitutional?
That deserves serious examination.
Muchow, in his analysis, compares the law’s treatment of regular-levy tax increments with tax increment financing, commonly called TIF. Both redirect revenue associated with increased property values. But his report also identifies a difference: TIF increments finance infrastructure debt, while HB 2014 distributes increments among county governments and several state funds.
That distinction matters to the policy debate. Mason County hosts the development and its local impacts while a substantial share of the revenue serves purposes elsewhere. Whether those differences also matter constitutionally requires a separate legal analysis.
A court could resolve that question if an appropriate challenge is brought. Neither the timing nor the outcome is certain.
But I would not bet against a lawsuit.
Let me be clear, data center investments in West Virginia are a good thing, something we should support.
That said, the governor should more proactively explain his law when it comes to tax implications, and soon, especially with two developments underway in Mason County.
Nor should the legislature hesitate to act if debate proves revision of revenue allocation worthy.