Since the turn of the century, fee-in-lieu agreements have been a tool for bringing manufacturing and other industries to the Golden Triangle.
Under fee-in-lieu agreements businesses are taxed at one-third of their full ad valorem for 10 years.
It has been a great thing for our community, bringing in new industry and jobs. It has also been good for the companies, too, enabling them to bear a smaller portion of their tax burden during construction, start up and development of their enterprises.
But in some cases, it’s been too good.
Recently, there has been an instance where a company appears to have performed bait-and-switch maneuvers that have allowed them to avoid paying full taxes when the 10-year agreement expires.
Lowndes County tax assessor Greg Andrews this week said he plans to reassess Caledonia Energy Partners next year after he received information from both the company and federal regulators that indicated the company had been shorting the county on taxes.
Caledonia Energy, under the Enstor umbrella, entered a fee-in-lieu agreement with county in 2006, valuing its natural gas storage business at $101 million. For the 10-year fee-in-lieu, the company paid about $500,000 annually through 2016. In 2017 and 2018, when full taxes kicked in, it paid about $1.1 million each year.
Shortly after the fee-in-lieu expired, Enstar sold Caledonia Energy to its parent company, ArcLite, for a deeply discounted price. ArcLite then leased it back to Enstor and assigned a value of $20.5 million for the same property that had been valued at $101 million just 10 years earlier.
Andrews said there were other misstatements offered by the company seemingly in an effort to decrease its tax burden, thus taking dollars away from the community.
For 2019, Andrews set the assessment at $66 million, which seems more than fair. The company appealed, but did not follow through with the challenge to the assessment when a hearing was called.
It’s disturbing to see these kinds of practices. If companies are serious about being good corporate neighbors, they’ll honor these fee-in-lieu agreements rather than looking for ways to exploit them.
Especially when they’ve been extended public incentives, corporations should resist playing shell games to avoid paying the taxes the rest of us are expected to pay.
The Dispatch Editorial Board is made up of publisher Peter Imes, columnist Slim Smith, managing editor Zack Plair and senior newsroom staff.
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