Thanks, But No Thanks

By Alton Porter
Courier Reporter
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Judge-Jim-Lovell-for-webAfter receiving advice from the county's delinquent tax attorney, Houston County commissioners revisited the matter of whether to accept an offer from Zilkha Biomass Energy Crockett LLC (Zilkha) to donate its Crockett facility to the county and unanimously voted not to accept the offer and property.

The commissioners took the action at a regular meeting on Tuesday, Dec. 27, reaffirming a position they were leaning toward at the previous meeting on Dec. 13, when – after discussion – they tabled the matter for further research to obtain more information.

Precinct 2 Commissioner Willie Kitchen offered the motion to decline the offer at the Dec. 27 meeting, and County Judge Jim Lovell seconded it, after the commissioners heard from Attorney Tab Beall of Perdue Brandon Fielder Collins & Mott LLP, who spoke at the meeting.
Zilkha executives recently extended the offer to donate the company's 13.125-acre wood pellet fuel manufacturing facility to the county in lieu of paying its 2016 property tax bill. Zilkha owes more than $290,000 in 2016 property taxes to Houston County, the City of Crockett and the Crockett Independent School District. More than $75,000 of the total is owed to the county.

Zilkha previously attempted to donate the property to the city, but city officials also declined to accept the offer.

The county commissioners first took the matter up for discussion and possible action at the Dec. 13 meeting, and it was at that time that County Tax Assessor-Collector Danette Millican informed them of the amount of Zilkha's 2016 tax bill.

After discussing the matter and leaning toward declining the offer, the commissioners felt they needed more information before they could make an informed decision and unanimously voted to table the matter.
Bringing the matter back before the court on Dec. 27, Lovell said, "We were all going to kind of research this a little more. We tabled it at the last commissioners court meeting.

"I talked with a gentleman who was wanting to buy (the property), which would solve everything. I talked with him again this morning and he doesn't think he's going to get it done. But, he thinks they're about to sell it to someone else. All of that's hearsay, not fact. All we're looking at is whether or not to accept it as a donation. Does anybody have any discussion on that?"
Noting that he was the one who offered the motion to table the matter at the Dec. 13 meeting in order "to gather more information," Precinct 4 Commissioner Kennon Kellum said, the information he wanted to gather pertained to what it would take to lay a rail spur to the facility (to enhance its usefulness). But, a rail spur would cost way more money than the county wants to spend, after I got to checking it out, he said."
Lovell added, "And there are $290,701.09 in taxes owed on it for the year 2016, of which $75,726.74 are county taxes. So, (if) we were considering accepting (it), that (the taxes) would have to be taken care of, as I understand it."

Beall explained that there are two statutes in the Texas Tax Code that deal with this matter. The first one, he said, provides for a "medium of payment, and the medium of payment is money." "You really aren't supposed to accept property in lieu of taxes," he said.

"The idea being that your county budget is based upon paying your employees and your vendors with money, not giving them bartered goods or whatever property you may have. So, that's the reason for that provision in the Tax Code."

Beall added, "There's a second section in the code that allows for you to accept property. But, procedurally, it has to go to the district with the biggest levy, which in this case, would be Crockett ISD. So, Houston County shouldn't even accept the property.

"But, the school (district, if it accepted the property,) could then convey it to the county. And then, you'd have to essentially buy the property from the city and the school (district)....

"So, I guess my legal advice to you is if you want to acquire the property, buy it outright. Go into executive session and discuss the purchase of real estate. Don't accept it as a gift because it poses all kinds of problems."
Beall continued, "Separately, and it's kind of related, they (Zilkha representatives) filed a suit against the (Houston County) Appraisal District challenging the market value of the property. And that's just another X factor out there in terms of them deeding the property to you (and) what it does to that lawsuit. And it would have the potential for a worst case scenario, setting a standard that would allow them to recover attorney fees from you for the suit that they filed against the Appraisal District. So, you don't want that to happen.

"Finally, the nightmare scenario is, you don't want somebody with toxic waste property to deed it to the county to get rid of a problem that they don't want to deal with.

"So, my advice to you is, if you want to buy the property, separately negotiate with them to buy it. But, don't accept it in lieu of taxes because it creates all kinds of problems. Not to mention the fact that the Tax Code doesn't allow it just as a wholesale quip pro quo acceptance of the property in lieu of paying taxes."

After Beall concluded giving his advice, Lovell thanked him and commented, "Well, that pretty well says it for us, unless we want to go into executive session and consider buying it. I don't think that we're there. This might be off the table anyway if they're negotiating with someone to buy (the property)."

At that point, Kitchen chimed in, offering his motion, reaffirming the position the commissioners appeared to be leaning toward at the Dec. 13 meeting, suggesting that the commissioners not accept Zilkha's donation offer and ending discussion on the matter.

After the motion was seconded by Lovell, all four commissioners and Lovell acted in unison in a show of hands vote to pass it, finalizing their decision to decline to accept Zilkha's offer to donate its property to the county in lieu of payment of property taxes.