A tax protest by ExxonMobil could cost the Lockwood School District nearly $1 million.
Leaders in Lockwood met with ExxonMobil executives and representatives from the Montana Department of Revenue on Thursday to discuss Exxon's decision and the ramifications it could have for the school district.
“What we will do we don't know at this point,” said Eileen Johnson, superintendent of the Lockwood School District.
District officials first heard the news from Exxon officials when they met on Thursday. Exxon sent five officials to the meeting, including two of its tax experts from Houston.
Those officials traveled to Helena on Friday to meet with state leaders. A call to Exxon's Lockwood office Friday was not returned.
The property tax that Exxon pays in Lockwood makes up 44 percent of the town's tax base. Johnson said that as of Thursday, the Exxon representatives had yet to decide how much of the tax due under the new rate they would protest.
Until Exxon decides, Lockwood won't know how much of a shortfall to expect. If Exxon protests the whole amount due, it would cost the district $900,000 — roughly the equivalent of 18 jobs, Johnson said.
“It's a huge deal,” said Teresa Stroebe, who sat on the Lockwood School Board for more than a decade and now represents Lockwood on the Billings School District 2 board.
The state reassesses property values every six years, the most recent reappraisal coming last year. When property owners disagree with the reassessment or even just the amount, they have the option to protest, the first step in challenging the state's reassessment.
When companies — or city residents — file a protest, they're still required to pay the taxes due. But the payments, instead of going to schools and other county services, sit in an interest-bearing escrow account until the dispute is resolved, a process that can take years.
If the protester prevails, a portion of the taxes are returned to reflect the lower tax rate along with the interest earned in escrow.
If the government prevails, the tax money is then distributed to the various county services and schools. The interest is moved to a fund used by the county to cover shortfalls caused by ongoing protested tax adjudications.
Under state law, school districts can access the protested funds a year after the protest begins. With the money then gone, should the county lose the protested tax case, it can levy another tax on the community to collect the money it needs to pay back the protester.
The irony is that the company then pays the new tax in order to get the money it won by protesting its old tax rate.
Last year CHS Inc., which owns the oil refinery in Laurel, protested its tax reappraisal, costing the Laurel School District $1.5 million in lost revenue. The loss of revenue threatened teachers' payroll, school programs and facility services.
Johnson and other officials in Lockwood have been watching the Laurel case closely. County officials believe the CHS protest there won't be resolved for another three or four years.
The timing of tax protests is one of the big frustrations for school officials. Tax bills go out Nov. 1 and property owners have until Nov. 30 to protest.
The problem, Johnson said, is that school districts by law have to have their school budgets finished and approved by the first of August.
“Schools can't be in the middle of the year and have this happen,” she said.
If the state would move the tax protest deadline to midsummer, schools would at least be able to figure the loss of revenue into its budget when someone protests, Johnson said.
Stroebe agreed. “It's obvious there's a problem,” she said.
Contact Rob Rogers at firstname.lastname@example.org or 657-1231.