Coal companies tied to W.Va. Gov. Justice agree to pay delinquent Kentucky taxes

Companies tied to West Virginia Gov. Jim Justice have struck a deal to resolve some of the biggest property-tax delinquencies in Eastern Kentucky’s coal counties, providing an infusion of cash for services and schools struggling with tight finances.

Knott, Pike, Harlan and Magoffin counties received checks last week totaling nearly $1.2 million, and Justice’s organization has pledged to pay an equal amount over the next six months.

The payment agreements will resolve tax debts dating back years.

“This is a really positive thing,” said Justice’s son, Jay. “We all know these counties desperately need these dollars.”

However, the state and some counties waived penalties and interest on debts under the agreement. That didn’t sit well with some local officials.

It’s not fair for companies tied to Justice, a wealthy businessman, to get a break when poor people in her county have to shoulder the full debt, often requiring them to set up deals to pay a little at a time, said Magoffin County Clerk Renee Arnett Shepherd.

“That’s not right,” Shepherd said. “I don’t agree and I think it’s crazy.”

The agreement did not cover Floyd County, where a Justice company called Kentucky Fuel has a delinquent tax bill of $671,000.

It’s not clear how that debt will be resolved. The county attorney said he’s not willing to waive all interest and penalties on the debt.

State officials said waiving penalties and interest on Justice-company taxes was part of reaching an agreement that will bring in money for counties they might not have been able to collect otherwise.

The state Finance and Administration Cabinet, which led negotiations with Justice over the debts, announced the agreement Monday.

“I am happy that we were able to bring much needed tax revenue to these counties whose budgets have been tightened because of decreasing coal severance revenues and other expenses,” Finance Secretary William M. Landrum III said in a news release. “This settlement means the state and these counties no longer have to spend time, money and other resources on lawsuits that could take many years with no guarantee that the taxes would be paid.”

The agreement included releasing suspensions on Kentucky Fuel’s mining licenses that the state Department of Revenue had sought because of the tax debts, according to the release.

The coal industry slumped badly in Eastern Kentucky and Central Appalachia beginning in 2012.

Counties get money from a tax on coal production, so their revenue has withered because of the drop in production and because of a state decision to reduce the valuation of coal reserves, forcing cuts for local governments and schools.

Knott County, for instance, has laid off 32 employees since the first of the year, sold 15 vehicles to reduce costs, and cut the number of hot meals it provides for senior citizens, said Judge-Executive Jeff Dobson.

Assistant Knott County Attorney Randy Slone, who has sued a Justice-family company called Kentucky Fuel to collect back taxes, said he did not waive any penalties or interest on Kentucky Fuel’s delinquent 2016, 2017 and 2018 taxes as part of the payment plan.

However, the county agreed to settle its lawsuit against the company over 2015 taxes for less than the potential full amount, though for more than the original tax bill.

The county intercepted $146,000 through a garnishment on payments from a local coal operator to a Justice company, so Slone estimated Kentucky Fuel will get a reduction of about $300,000.

The company owed the county $2.1 million as of June 1, but the county needs cash now and the deal will accomplish that without more court fights.

A Justice company sent the county a cashier’s check for $818,207.20 last week, half the amount the company will pay. Slone said the county might not have been able to collect that much without the state-negotiated settlement.

“My county’s choking to death here,” Slone said. “We thought it was a good deal.”

Kentucky Fuel
Conveyors to move coal stand idle at a Kentucky Fuel Corporation underground mine in Knott County. The company, once owned by West Virginia Gov. Jim Justice, owed more than $2 million in delinquent property taxes in May 2019. Bill Estep

Jim Justice isn’t the only coal operator with delinquent taxes in recent years, but several factors set him apart, including his election as governor in 2016.

He was elected as a Democrat but announced a switch to Republican at a rally with President Donald Trump.

Justice also has resources many coal operators don’t, including agricultural operations and an iconic resort, The Greenbier, that has a championship golf course and casino.

Forbes magazine said in an April article that Justice’s estimated net worth is $1.5 billion and that he and his children own around 100 companies.

Coal companies linked to Justice also had some of the largest delinquent property-tax bills in Eastern Kentucky.

As of June 1, Justice-family companies owed a total of $3.6 million in delinquent taxes, penalties, and interest on the debts in Knott, Pike, Floyd, Harlan and Magoffin counties, according to local officials.

Coal companies owe property taxes on their land, unmined coal and equipment.

Much of Justice’s debt was for Kentucky Fuel, which Justice once operated but transferred along with other coal companies to the control of his son and daughter, Jill Justice, in 2017.

The delinquent totals are much higher than the original tax bills because the unpaid bills roll up more penalties and interest monthly.

Justice companies sometimes signed agreements with counties to pay off delinquent taxes in recent years, but didn’t always complete the deals.

Jay Justice said the coal companies got behind on taxes because of the sharp downturn in the coal market.

“That market was so bad for so long,” Justice said.

It’s been only recently that there’s been enough of an upturn to begin setting aside money for tax debts, Justice said.

Justice said his family sold some assets and refinanced others to improve finances, but that revenue from coal operations in West Virginia was the biggest factor in being able to pay down tax debts in Kentucky.

West Virginia has seen an uptick in coal production and jobs since Trump took office, primarily because it has a good deal of metallurgical coal, which is used in steel-making.

Eastern Kentucky, which has less metallurgical coal, has not seen a significant recovery.

Coal production totaled 17.1 million tons in Eastern Kentucky in 2018, down from 18.1 million in Trump’s first full year in office in 2017, and 68 million tons in 2011.

President Donald Trump holds a sign before speaking during a rally Thursday, Aug. 3, 2017, in Huntington, W.Va. (AP Photo/Darron Cummings) Darron Cummings AP

Justice said he has a mine operating in Pike County and another in Letcher County, with 75 employees total, and is working to resume production at another mine in Pike County that would hire 50 more workers.

Many coal companies declared bankruptcy in recent years, but it’s been a point of pride for Justice not to do that.

“It’s not the thing we think to do,” he said.

Justice and Richard A. Getty, a Lexington attorney who represents him, said they talked with state officials about an agreement to resolve delinquent taxes in Kentucky.

The state agreed to forgo interest and penalties on its part of the tax debt, with Justice companies paying the full amount of the original bills, Justice said.

The companies paid $1.46 million recently to wipe out delinquent property-tax debts to the state, Justice said.

A state official checked with county attorneys to see if they would accept the same terms, though with the difference that the counties would get half their money now and the rest in six monthly installments.

Pike County attorney Howard Keith Hall confirmed the Revenue Department checked with him on the deal, and he agreed to waive the interest and penalties on Kentucky Fuel’s $430,000 delinquent tax debt.

Hall he was a “little disappointed” about waiving some of the money the company owes. Penalties and interest on back taxes can help operate his office, he said.

Still, he said he trusted the work of the Revenue Department, and that the deal with Justice is best for the county and state.

Hall agreed to a total payment of just over $350,000. The county got a check last Thursday for $177,497.10, Hall said.

Shepherd, the Magoffin County clerk, said her office received a check for about $80,000 to apply to Kentucky Fuel’s delinquent tax bill, indicating the company plans to pay $160,000 of a tax debt that totaled $207,243 on June 1.

“How does he get by with that?” she said of Justice.

Harlan County Attorney Fred Busroe’s office also confirmed getting a check this week toward tax debts on Justice companies.

However, Floyd County didn’t get a check.

Kentucky Fuel owes back taxes there totaling $671,655 for 2013 through 2018, according to county Attorney Keith Bartley.

Getty, Justice’s attorney, said that the state provided Justice with a list of counties and delinquent tax amounts during discussions on the payment agreement, and Floyd County wasn’t included.

Bartley said he had talked several times with another attorney for Kentucky Fuel about its taxes, so the company was aware of the debt.

Getty said Justice wants to settle Kentucky Fuel’s tax debt in Floyd County under the same terms as with the other counties, meaning the county would waive penalties and interest and receive a payment for half the original amount of the bills now and half later.

Getty said the company thinks the principal amount on the bill is about $370,000. That would be $300,000 under the total amount.

Jay Justice wired half of that payment, $185,000, to Getty on Friday.

“I would hope the fiscal court would be as gracious as the other counties and accept the check for the full amount of principal,” Getty said.

However, Bartley said collecting delinquent taxes falls under the authority of his office, not the fiscal court.

Bartley said he’s not willing to waive all the penalties and interest on Kentucky Fuel’s debt, and will sue if necessary to try to collect.

“That is a deal we would not give to a Floyd Countian,” Bartley said of waiving all penalties and interest on a delinquent tax bill. “Why would we give it to the governor of West Virginia?”