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West Virginia Board of Public Works approves reduced utility values, tax rates

Gov. Jim Justice raised concerns Wednesday about the decrease in property tax assessments for large utility companies. (Photo by Steven Allen Adams)

CHARLESTON — Clearly disappointed, members of the West Virginia Board of Public Works Wednesday begrudgingly approved reduced property values and tax rates for the state’s major utilities.

The Board of Public Works met in the Governor’s Cabinet and Conference Room to set final assessments for public utility companies for tax year 2022 and certify tax rates on each class of property.

According to the State Tax Department, the total final assessments for tax year 2022 are $12.4 billion, which is $23.2 million less than the total final assessments for tax year 2021. It is also $500 million less than the tentative assessment released by the State Tax Department at the September Board of Public Works meeting.

“I don’t understand this,” said Gov. Jim Justice. “With a state that is moving as positively as we’re moving and with record revenues all over the place, how can we come up with any level of backup?”

The Board of Public Works consisting of the Governor, Secretary of State, Attorney General, Agriculture Commissioner, State Auditor, State Treasurer and State Superintendent of Schools sets the value of property for tax assessments for public utility companies that encompass more than one county.

The owner or operator of every public utility is required to file a report with the state tax commissioner no later than May 1 itemizing the utility’s property for the previous calendar year in detail set out by law. The tax commissioner reviews the reports, obtains any additional information needed, sets the tentative assessment for each utility and mails a copy to the owner or operator of the utility.

The types of utilities include airlines, private bridge owners, bus companies, electric providers, natural gas providers, non-cellular communication (paging services), railroads and carlines, pipelines, cell phone companies, private sewer services, landline telephone services, underground gas storage, water and water/sewer services.

According to the document prepared by the State Tax Department and approved by the Board of Public Works, the final recommended values of utility properties for tax year 2022 were $4.5 billion, which was $482.7 million less than the recommended tentative value of nearly $5 billion.

State Tax Commissioner Matt Irby said the decrease in rates and values is reflective of revenues from 2020 during the first year of the COVID-19 pandemic when the economy slowed down due to business shutdowns.

“They were pretty substantial this year,” Irby said when talking about the number of adjustments to tentative utility property tax values. “They mostly related to a more heightened focus on the income approach to value. We had a number of conversations with taxpayers about their income. After those conversations, we made some adjustments to that income approach and these are the assessments we arrived at.”

Some of the largest drops between the tentative tax assessment and the total assessment were in natural gas. The tax assessment for natural gas pipelines dropped by $52.4 million, from $3.44 billion in tax year 2021 to $3.39 billion for tax year 2022. The assessment for underground natural gas storage dropped by $40.2 million, from $204 million in 2021 to $163.8 million for 2022.

Irby said the State Tax Department was using an emergency rule to determine the value of natural gas property as required by House Bill 2581 passed by the Legislature last year. HB 2581 requires fair valuations for natural gas, oil, and natural gas liquids-producing property based on the fair market value based on a yield capitalization model applied to gross royalty payments for royalty interest to net proceeds once royalties and annual operating costs are subtracted from gross receipts.

“What we did do was move them closer to an income approach rather than a cost approach and that’s where we came out after we did that,” Irby said. “Our legislative rule actually asks us to do that. It asks us to produce a cost approach to value and income approach to value and try to correlate the two and come up with a final value, but it says when all else is equal, you should prefer the income approach to value.”

After hearing the report and reviewing the rates and values, Justice expressed his displeasure. Revenue from property taxes benefits county governments and school systems.

“This is tremendously important to West Virginia that it’s done equitably and done in the most advantageous way, but fair to our companies and to all those folks out there, but to our state as well,” Justice said. “I’m willing to go forward, but I’m telling you there are certain industries here that, in my opinion, are bathing in money today. If they’re bathing in money, they ought to step up to the plate and pay their fair share. That’s what they should do.”

State Auditor J.B. McCuskey, participating in the meeting by conference call, criticized the process for approving the property values, saying the Board of Public Works should be given more time to review the reports before voting to approve them. McCuskey and Justice both agreed the process for approving the assessments and values needs to change going forward.

“This is a really, really important duty and every single time that this happens, we get these valuations roughly 20 minutes before we’re supposed to vote on them,” McCuskey said. “I just don’t understand how we’re supposed to vote and make what is very obviously a wildly important decision for the state when we’re given less than a day to review the data and how they came up with it and why we’re doing what we’re doing.”

Steven Allen Adams can be reached at sadams@newsandsentinel.com.

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