Most of the Golden Triangle Regional Airport Authority property, including the airport terminal building, is shown in this aerial photo. Multiple businesses located east of the runway on GTRA property may have mistakenly paid millions in property taxes to Lowndes County and Lowndes County School District. Steel Dynamics' tan-colored building can be seen in the background. Photo by: Courtesy photo
August 16, 2018 11:10:15 AM
A Mississippi Supreme Court decision issued in May will cost Lowndes County more than $800,000 in property taxes for at least the approaching fiscal year.
Almost $700,000 of that total would have gone to Lowndes County School District.
The decision, issued on May 10 in the case Rankin County Board of Supervisors v. Lakeland Income Properties, set the stage for any commercial properties on airport-owned land to be permanently exempt from paying county ad valorem or school taxes. The court ruled unanimously in favor of Lakeland Income Properties, which operates a strip mall on property owned by the Jackson Municipal Airport Authority. The ruling overturned those of two lower courts who held the company had to pay county taxes.
For the ruling, the court leaned on Mississippi Code Section 61-2-21 of 2013, which says contracts, leases, structure and other things constructed on airport property are exempt from paying property taxes. The court, in its ruling, found any commercial property on airport-owned land is exempt.
Justices also granted a tax refund for one year (2015) to LIP, which had requested refunds for up to three years.
In Lowndes County, there's growing concern about what the ruling could mean for businesses located at Golden Triangle Regional Airport.
Three major industries are located on GTRA's property -- Airbus, Aurora Flight Sciences and a portion of Stark Aerospace. Together, those companies pay a little more than $800,000 in county and school taxes per year. Airbus, which has three phases -- one of which has paid full taxes since 2015 -- paid $99,180 in real and personal property taxes to Lowndes County and $448,394.81 to the Lowndes County School District in 2017. Aurora, which is also in three phases, pays $15,663.81 in real and personal property taxes to the county and $182,914.07 to the schools.
Stark Aerospace, which has hangers on airport property, pays about $586 in county taxes and $6,086 to the schools on just the portions now exempt. Stark's main plant is located off GTRA property, which means it will continue to be taxed.
All told in 2017, the businesses paid $691,394.88 in school taxes and $115,412.63 in county taxes.
Properties that are under tax exemptions pay full school taxes (46 mills) but only 4.29 mills (of 40 mills) in county taxes. Of the county portion, most goes to East Mississippi Community College.
Lowndes County Tax Assessor Greg Andrews said the Supreme Court ruling could cost EMCC about $54,000 each year.
Since the law passed in 2013, the three companies have paid more than $3 million in property taxes the Supreme Court now says they should not have paid.
LINK: Ruling provides 'new' interpretation of law
Attorney Chris Pace, who works on economic development cases across Mississippi and is the lawyer for the Golden Triangle Development LINK, said the statute the Supreme Court used for its ruling hasn't generally been interpreted to apply to any commercial properties on airport land.
"I would tell you that I think for many, many years, the way that's been interpreted by most taxing authorities is that it has to be related to the airport," Pace said. "That's folks doing fueling for the aircraft, food service, rental car people."
LINK CEO Joe Max Higgins said the companies that are located on GTRA's property also seemed to think the law did not apply to their properties.
The LINK met in June with county and school district officials and representatives from the companies. During that meeting, he said, Pace laid out what happened with the case. He said he also asked the companies to consider not asking for a refund, as the ruling allows.
"I said we don't need to charge this tax moving forward, and I would ask you three companies to understand that the cash outlays and the things that we did up front for you when you came here -- running water lines, running sewer lines, using state grants and putting our money with it -- give that consideration to whether or not you ask for the refund or the money," Higgins said.
So far, none of the companies have issued a definitive statement on whether they will ask for refunds for already-paid taxes. Andrews said more meetings have followed and it appears that most of the companies -- save one he declined to identify on Wednesday -- have leaned toward not asking for a refund.
"We've had a couple of meetings with the company heads," Andrews said. "One might ask for a refund. I don't think the others will. Budgets are already set and they don't want to upset the apple cart because most of the money is school money."
Funding loss 'devastating' to LCSD
The loss of tax funding could be "devastating" for the county schools, according to Superintendent Lynn Wright.
For Fiscal Year 2019, Wright said, the district may look to move ahead with a budget similar to last year's and will try to fund the revenue loss through reserve funds without raising taxes.
However, Wright said if nothing changes in the future, it could put the district in a tight spot.
"We're looking at all kinds of different things," Wright said. "It could force us in the future to look at a reduction in some of the personnel or some of the programs we offer."
Wright added that a request for tax refunds from the companies would "definitely" make the situation worse for the district.
He said the district is hoping that legislation proposed by District 39 Rep. Jeff Smith, who also is LCSD's board attorney, to get around the court's decision will help prevent further losses.
"We're going to try not to borrow any more trouble," he said. "We're eternal optimists. We're hoping things are going to work out and possibly there will be some more industry coming in to help make up the differences."
County may raise taxes
Lowndes County Board of Supervisor President Harry Sanders said the loss of revenue presents a "two-pronged" problem for the county. There's the direct loss in revenue, he said, and an indirect loss because the personal property at the companies is no longer counted on the county's tax rolls.
That, he said, lowers the value of a county mill, which could cost the county another $1 million.
Those losses in revenue, with operation costs staying the same -- or rising, in the case of fuel and asphalt for the road department -- he said, make a tax increase more likely.
"We're going to be in a crunch for doing our budget," Sanders said. "We're probably most likely going to have to raise taxes if we can't find places to cut that doesn't hurt things."
Andrews said there's also a question as to whether property that a company owns and subleases to another company can be taxed.
Lowndes County is not taxing such properties this year, but Andrews said Rankin County is. If taxing subleases is legal, he said, it would allow Lowndes County to recapture all of Aurora's property taxes and possibly portions of Airbus and the Stark hangars.
"Lowndes County is not taxing anything on airport property in 2018, but will be looking at Rankin County very closely," Andrews said.
Calls to Rankin County officials were unreturned by press time.
Legislative action and future incentives
In the meantime, Smith, who chairs the House of Representatives Ways and Means Committee, said he will introduce legislation at the next regular session in January, to get around the decision because the court's decision did not mesh with the law's original intent.
District 37 Rep. Gary Chism (R-Columbus) and District 41 Rep. Kabir Karriem (D-Columbus) expressed support for changing the law when contacted on Wednesday.
Smith also said that for businesses that want to locate at airports to avoid taxes, there may be a cost.
"There are all sorts of incentives that MDA has enacted," Smith said. "If the county can say 'Hey, Airbus, locate at our airport and you'll never have to pay taxes again,' you can rest assured those companies will never get any help from the state of Mississippi.
"They may not want that because for these businesses, there's a whole lot of help you can get that's far in excess of taxes. (For example) Severstal (which is not located on airport property) got a $25 million grant and a $110 million loan. They would have to be in existence for something like 40 years to make that up."
Reporter Slim Smith contributed to this report.
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