Letter From Calvert BOCC on Dominion and Payment in Lieu of Taxes

February 25, 2014

Dominion Cove PointA recent letter to the editor in the Recorder questioned the logic behind the Payment in Lieu of Taxes (PILOT) and tax credit agreement reached between the Calvert County Board of County Commissioners (BOCC) and Dominion that is integral to the proposed expansion of the Cove Point Liquefied Natural Gas (LNG) Terminal.

It is instructive to consider the larger context of this issue. Calvert County faced two economic realities during negotiations on the tax agreement. First, declining local revenues over a period of years challenged county government’s ability to maintain balanced budgets; the county was able to do this without tax increases. Second, Dominion – a major local corporate partner and tax payer – faced a global energy marketplace in which excess U.S. natural gas supplies changed the country’s market position from an importer to an exporter of LNG. The opportunity to convert the Cove Point facility to an export facility addressed both of these circumstances.

Most importantly, we understood that once existing import contracts expired at Cove Point it would no longer be viable to maintain the site as an import-only facility. Without the tax agreement, and with the current contracts set to expire, Calvert County ran the real risk of losing 100 existing jobs and approximately $15.8 million in tax revenue annually. The BOCC negotiated the highest tax payment possible that keeps the expansion economically viable. The numbers speak for themselves. The combined five-year PILOT agreement and nine-year tax credit is estimated to be valued at approximately $804 million. Following the sunset of the agreement, the Cove Point facility will be taxed at full value.

The agreement also helps Dominion make the economic case behind the proposed expansion. It aids plans to safely expand Cove Point and export LNG while reducing worldwide greenhouse gas emissions. Demand dictates that export facilities will be built somewhere in the United States and there are states with more advantageous tax arrangements than Maryland. We believe it is shortsighted to assume that the Cove Point expansion would proceed regardless of the county’s taxing structure. Tax credits help level the playing field and ensure we remain competitive. Even with the credit, Dominion will likely be the county’s single largest tax payer and will play a significant economic development role in our community.

The earliest the proposed plant would pay new property taxes on the expansion would be in fiscal year 2018. Until then, we will work diligently through the many fiscal challenges the county faces. We believe the Dominion tax agreement is the best solution to ensure a viable future for the Cove Point facility and, most importantly, to bolster the fiscal and economic strength of our community.

CLICK HERE TO SEE LETTER

The above letter was sent to SMNEWSNET by Mark Volland, Marketing Communications Specialist for Calvert County Department of Economic Development

 

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