balk at granting a
tax break for reopening refinery
members of County Council signaled a possibility that they will
seek to block county government from joining with the state in
offering incentives to the company that has announced it will
buy and reactivate the oil refinery near Delaware City.
"I want to see people
put back to work [but] I have a problem with giving away a half
million [dollars] to this business," George Smiley, chairman of
Council's finance committee said.
While several of his
colleagues agreed with him and no one took an opposing position
at a recent committee meeting, one of the 13 council members
said privately after the meeting that "it's all just talk."
Governor Jack Markell
recently announced that his administration has brokered a deal
by which P.B.F. Energy Partners L.P., an investment subsidiary
of Germany-based Petroplus A.G., will buy the refinery idled by
Valero Energy Corp. and its power plant for $220 million. That,
he said, will "bring 600 full-time jobs to Delaware in exchange
for certain economic incentives" it the new owner follows though
on plans to overhaul the refinery and put it back into operation
in the early spring of 2011.
The incentives, the
governor's announcement said, would include a $20 million loan
which would convert into an outright grant if at least $100
million is spent on the overhaul and 600 jobs are maintained for
five consecutive years. Another $10 million would be given to
the company to help pay for projects to curb nitrogen oxide
A separate statement
issued by Petroplus referred to the purchase deal being
contingent on obtaining "certain regulatory approvals and
obtaining satisfactory permits from local regulatory
tone of the conversation
at the committee meeting on Apr. 13 indicated that Council
members have not been told what incentives county government
would be called upon to provide.
"We're not sure what
they're going to be looking for from the county," Nicole
Majeski, County Executive Christopher Coons's chief of staff,
told the committee. She added that anything in that regard would
be determined "in consultation with us" and that County Council
would be involved.
As previously reported,
Coons's spokesperson Angie Basiouny told Delaforum that he is
"working closely with the governor to determine what the county
can do to assist this important venture."
Smiley and others at
the committee meeting referred to the possibility that precedent
was sent when county government agreed to a five-year exemption
from property taxes included in the economic development
incentive given Fisker Automotive in exchange for its
acquisition of the former General Motors automobile assembly
In objecting to a
similar deal for Petroplus, Smiley noted that the county must
rely on the property tax as its primary source of income. It has
been unable to diversify revenue streams because Markell, his
predecessor Governor Ruth Ann Minner, and the General Assembly
have turned deaf ears to county pleas for enabling legislation.
State government, on the other hand, has a variety of revenue
sources, Smiley said.
John Cartier said that,
at a minimum, the county should be entitled to a 'payment in
lieu' of the tax to compensate for public safety and other
services it will be called upon to provide. Moreover, he said,
that arrangement should be limited to a fixed time period "to
ensure we're not going to be forever locked out of revenue from
Council president Paul
Clark said he was troubled by the apparent disparity in granting
tax relief and other incentives to large companies while not
doing the same for small businesses making proportionate
job-creating investments. "If we give it for [employing] 1,000
people are we also going to give it for employing 10?" he asked
Penrose Hollins took up
the same theme noting that "the owners of these [large]
businesses stand to make millions" from their investment.
Beyond the possibility
that a large chunk of property tax could be in jeopardy, there
is concern that the manner in which the refinery acquisition is
structured could also shut down its collecting anything from the
real estate transfer tax. If instead of buying the property,
P.B.F. Energy Partners could possibly acquire and merge with an
existing or a new Valero subsidiary company that would carry the
refinery on its books as an asset.
County attorney Gregg
Wilson noted that after the Claymont Steel plant was acquired in
that way by the American subsidiary of a Russian company the
General Assembly enacted legislation to block a repetition.
"That loophole has been corrected, but there are always other
loopholes that can be created," he said.
Joseph Reda questioned
how much revenue county government will receive from permit fees
related to overhauling the refinery. "If it's done as
maintenance, they won't need any permits," he said. The
Petroplus announcement referred to an intention "to perform
major maintenance work at the refinery over the next nine
months" prior to operations being restarted.
Ed Milowicki, the
county's chief financial officer, pointed out, however, that if
the deal were to fall through and the refinery were permanently
shut down "we're not going to get any tax revenue."