State

Coal baron Jim Justice owes $4.2 million in overdue Ky. taxes as he seeks office

Democratic candidate Jim Justice speaks during a gubernatorial debate against Senate Majority Leader Bill Cole R-W.Va., Tuesday, Oct. 4, 2016 at the Clay Center in Charleston W.Va.
Democratic candidate Jim Justice speaks during a gubernatorial debate against Senate Majority Leader Bill Cole R-W.Va., Tuesday, Oct. 4, 2016 at the Clay Center in Charleston W.Va. AP

A billionaire coal operator who wants to be governor of West Virginia is paying off delinquent property taxes in Eastern Kentucky but has a big debt to whittle down.

As of Oct. 12, coal companies controlled by Jim Justice owed $4.2 million in back taxes on equipment, land or coal reserves in Knott, Pike, Floyd, Harlan and Magoffin counties, county records show.

Local officials have had some frustrations in recent years trying to collect property taxes from Justice, a Democrat that Forbes says has a net worth of $1.56 billion.

Property taxes in Kentucky are a key source of funding for schools, county governments, health departments and other local services.

That money is particularly important as Eastern Kentucky counties struggle with a sharp downturn in coal production that has slashed receipts from a tax on mined coal, said Knott County Judge-Executive Zachary Combs Weinberg.

Weinberg said the budget in his mountainous, rural county is half what it once was. The county has cut employees through attrition, doubled up on duties for many that remain, reduced insurance benefits and even started turning off the lights at county parks at night.

“Any monies that we don’t receive makes it that much tougher,” said Weinberg, a Democrat. “It affects all the people in the county.”

$2,289,738 The amount a Jim Justice company called Kentucky Fuel Corporation owes in delinquent property taxes in Knott County, Ky.

A Justice company called Kentucky Fuel Corporation owes a total of $2,289,738 in delinquent property taxes in Knott County, according to records in Clerk Ken Gayheart’s office.

That is by far the largest delinquency in the county, Weinberg said.

Justice’s coal companies also owe $1,086,054 in delinquent property taxes in Pike County; $478,051 in Floyd County; $186,753 in Magoffin County; and $183,286 in Harlan County, local records show.

Tom D. Lusk, chief operating officer at Justice’s Southern Coal Corporation, said company officials are working with Kentucky counties and the state to resolve tax issues.

Making payments

When the Herald-Leader did a story on Justice’s unpaid taxes in Kentucky a year ago, his son, Jay Justice, vowed that Jim Justice ultimately would make good on his obligations.

Officials in several Eastern Kentucky counties said Justice’s companies have made large payments on delinquent tax bills in the run-up to Election Day. Justice faces Bill Cole, a Republican who owns auto dealerships and is president of the West Virginia state Senate. Some polls have shown Justice leading.

In Pike County, Kentucky Fuel signed an agreement to pay its back taxes in eight monthly installments of $150,000 each, said Ronnie Keene, who handles such agreements for County Attorney Howard Keith Hall.

The company made the first payment in September and has sent a check for October, Keene said.

In Harlan County, Sequoia Energy and other Justice companies paid a total of $630,000, satisfying all their delinquent taxes except for 2015, and are working on paying those, said Denise Williams, who works in the office of County Attorney Fred Busroe.

Travis Joseph, an assistant county attorney in Magoffin County, said Kentucky Fuel had paid off all its delinquent taxes from 2012, 2013 and 2014, and signed an agreement to make 10 monthly payments of $22,800 each to satisfy its 2015 taxes.

The company made the first payment under the plan in September and has another due by the end of October, Joseph said.

“There’s a lot of school systems and county governments that depend on it,” Joseph said of property tax revenue.

Floyd County Attorney Keith Bartley said Kentucky Fuel has nearly paid off its delinquent 2013 and 2014 taxes and is negotiating a plan to pay its 2015 taxes.

And in Knott County, Kentucky Fuel paid its 2013 taxes and agreed last month to begin paying $120,000 a month to satisfy its 2014 tax debt, according to assistant County Attorney Randy G. Slone and a court document.

The company made its first payment in September.

The company’s delinquent 2015 property taxes won’t be turned over to the county attorney’s office for potential collection actions until next year, Slone said.

‘Push it to the brink’

It took some prodding to get payments from Justice flowing to Eastern Kentucky counties where his companies once mined coal valued at millions of dollars.

Kentucky Fuel had reneged on one payment plan in Pike County last year before signing the new deal this year.

In Harlan County, Williams said she worked with Justice company officials for months in early 2015 to set up a payment plan on back taxes, making changes they requested and sending new versions.

Justice’s companies eventually signed a deal to pay $70,000 a month, but didn’t send the first check, Williams said.

$2.6 million The amount Jim Justice has loaned his gubernatorial campaign since May 2015.

The county sued in October 2015. Justice’s companies started making regular payments after that, Williams said.

Magoffin County also sued Kentucky Fuel. Knott County sued the company twice.

Slone filed the first complaint for the county in January 2015 to collect 2013 taxes. The company pledged to satisfy a $1.2 million judgment by July 2015 and paid $800,000, but then stopped, according to a court document.

A judge later granted the county’s request to sell the company’s property, but Kentucky Fuel paid off the delinquency, Slone said.

The county sued again in July to collect Kentucky Fuel’s delinquent 2014 taxes. That’s what led to the agreement to begin paying $120,000 a month in September.

“It seems you have to push it to the brink” to get a payment from Justice, Slone said. “Just talking doesn’t seem to get the job done.”

Money for politics

Justice isn’t the only coal operator who hasn’t paid taxes on time the last few years.

The bottom dropped out of the Central Appalachian coal industry in 2012 as a number of challenges piled on, including competition from natural gas, a federal push for tougher environmental rules to protect air and water quality and the depletion of many thick coal seams, which contributes to relatively high production costs.

More than half the coal jobs in Eastern Kentucky have disappeared since 2011.

The downturn has hit Justice along with other coal companies in the region, though unlike many he hasn’t declared bankruptcy.

154 The number of coal mines and related facilities controlled by Jim Justice. He has active mines in Virginia and West Virginia, but all his mines in Eastern Kentucky are listed as idled, non-producing or abandoned.

Federal records list Justice as the controller of 154 coal mines or facilities, such as preparation plants. He has active mines in Virginia and West Virginia, but all his mines in Eastern Kentucky are listed as idled, non-producing or abandoned.

But Justice has resources many coal operators don’t. His website says he is president and CEO of 102 companies, with interests not only in coal, but agriculture, Christmas tree farms, timber, golf courses, real estate and other ventures.

One of his best-known properties is The Greenbrier, an iconic resort in White Sulpher Springs, W.Va. that he rescued from bankruptcy and renovated.

“He seems to have quite a bit of resources,” Slone said.

Records in West Virginia show Justice has loaned his campaign $2.6 million since May 2015.

It is “frustrating” that Justice put that money into his political race while owing delinquent taxes, Weinberg said.

‘A little late here and there’

Justice has faced lawsuits in Kentucky and other states in recent years by vendors alleging his companies hadn’t paid them for mining supplies and other goods, and his unpaid taxes have been an issue in his bid for governor.

The Herald-Leader, the Charleston Gazette-Mail, the Washington Post and others have done earlier stories on the issue.

Most recently, National Public Radio reported on Oct. 7 that Justice’s coal companies owe a total of $15 million in back property taxes, state coal-severance and withholding taxes, federal income, excise and unemployment taxes and unpaid mine-safety penalties.

Delinquent property taxes in Kentucky were part of that total.

When Justice was asked about those delinquent taxes and fines at a debate last week, he said he writes more than 7,000 checks a month at his various businesses and that he “may be a little late here and there,” but ultimately pays his bills, according to a report by The Associated Press.

Justice said he deserves credit for keeping some coal companies going to provide jobs during a time many have shut down.

Penalties add up

Justice, like other delinquent taxpayers, faces much higher payments by not settling the bills when they were due.

For example, Kentucky Fuel’s initial 2015 bill on land it owned in Knott County was $65,251. Last week, the payoff with added interest and penalties was $110,909.

That means when Justice does pay off a delinquent bill, schools and other agencies get more than they would have under the initial bill.

Still, if districts that depend on property tax revenue don’t get the money when it’s due, that can cause problems with budgeting and cash flow and leave them short in that year, said Nancy Ratliff, finance director for the Pike County school system.

Ratliff said she usually assumes a property tax collection rate of 93 to 95 percent in drawing up the system’s budget.

Ratliff said the rate so far for the 2015 tax year has been about 75 percent. Ongoing delinquent collections will push that up, but the shortfall in payments played a role in the system spending more last school year than it took in, Ratliff said.

The district had to tap its contingency fund to make up the difference.

“Not getting that revenue in the year you anticipate it greatly impacts your ability to pay,” Ratliff said. “Just like if you didn’t get a paycheck.”

  Comments