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Coal Tax Credit Phaseout Bill Could Impact VCEDA



By Mike Still

April 5, 2021 - While a proposed change to legislation phasing out Virginia’s coal tax credits could benefit a Southwest Virginia college, another longtime regional agency is waiting to see the full impact on its revenues.

Jonathan Belcher, executive director of the Virginia Coalfield Economic Develop- ment Authority, said Gov. Ralph Northam’s call to change General Assembly House Bill 1899 to allocate expected coal production and use tax revenue to the University of Virginia’s College at Wise would be a good move for the region.

“We’re very glad to see funds go to the college in the governor’s proposal,” Belcher said Friday. “That still doesn’t address the issue of funding removal from the authority’s revenues.”

While Northam’s proposal to fund UVA Wise from the tax credit phaseout still has to pass in the General Assembly’s April 7 veto session, Belcher said it could mean as much as $900,000 in revenue cuts starting in about three years.

In contrast, Northam’s alteration to the bill, if passed, would see UVA Wise start receiving about $6.5 million annually beginning in about three years.

Belcher said that cut would mean about a 25% loss of the authority’s $3-4 million annual funding.

The VCEDA, for more than three decades, has operated with revenues from the state’s coal and gas severance tax for economic development projects across the authority’s eight-county and one-city service area. Belcher said the authority had also been granted revenues stemming from tax credits for Virginia coal producers and utility companies using Virginia coal, but state law required the use of severance tax funds first.

While coal and gas severance tax money allowed VCEDA to fund several large commercial and manufacturing projects into the 1990s, Belcher said that declining coal production from the 1990s to today marked a greater dependence on tax credit-based revenues.

“We still receive severance tax revenue from mining in three or four counties, but that money has dwindled,” Belcher said. “We are the only agency negatively impacted as far as economic development in the state budget bill.”

Belcher said HB 1899’s sponsor, Del. Sally Hudson, D-Albemarle, has addressed concerns about possible VCEDA funding loss in the bill with provisions for a stakeholder review process before the full phaseout of the tax credits.

“That at least puts a mechanism in place to deal with these concerns,” Belcher said. “Delegate Hudson indicated that she was not trying to harm economic development efforts in Southwest Virginia.”

Across the VCEDA service region, Belcher said, four counties provide almost all of the coal and gas severance tax revenue: Buchanan, Dickenson, Tazewell and Wise, in descending order of production.

Even with a declining coal economy, Belcher said, 2021 has been one of the authority’s busiest years in terms of large-scale projects and the numbers of small businesses getting grants and loans through VCEDA’s Seed Capital program.

Recent VCEDA activity includes support for expansion of the Tempurpedic plant in Duffield and manufacturing projects in Tazewell and other counties, Belcher said. Other long-term projects include sites in the Lonesome Pine Technology Park in Wise County and support for the Mullican Flooring plant, also in Wise County

“Small business projects through the Seed Capital program make up about 10% of our budget, but they are also an important part of our work,” Belcher said.