Plastics and chemicals maker Lanxess Corp. has won a $1 million tax appeal that will be paid by the same Ohio school district and village it once polluted with carcinogens leaked into the air.
The Pittsburgh-based company overpaid its taxes in 2005, 2006 and 2007 due to an error by the Ohio Department of Taxation. The state over-assessed the value of tangible personal property, such as machinery and office equipment, at Lanxess' former polymers plant in Addyston, Ohio.
Now the town of 1,000 residents and the Three Rivers School District will have to repay the disputed tax money. The village owes about $150,000 and the school system $900,000.
Board of Education Vice President Tim Wagner said local officials were stunned to be socked with such hefty bills.
"When our treasurer shared that with us as a board, our hearts just sank. It was like, oh my goodness, how do we deal with that?" Wagner said. "We truly feel blindsided. The village also is affected. Their bill is like $150,000 and my understanding is that it's more than they take in taxes in a half-year cycle."
Ohio doesn't require taxing entities be notified of corporate appeals — something Wagner calls a glitch in state law.
"If this was a private person with private property, the state would notify us the appeal is taking place," Wagner said.
He also is critical of Lanxess, which no longer owns the plant, for not giving school and village officials any warning like Duke Energy Ohio Inc. did when it filed a similar tax appeal in 2009.
"When Duke appealed we weren't happy about it but they were good neighbors," Wagner said. "They said, 'Hey, you need to know this so you can plan for it, and if we win, it won't shut your school down.' We then cut that money out of our budget during the appeal process. We set it aside. It was no big deal. We'd have preferred to keep the money but it was rightfully theirs."
Lanxess officials issued a statement Friday saying they are willing to consider payback options. It says: "We at Lanxess value our good, long-standing relationships with the city of Addyston, Hamilton County and the state of Ohio. We are aware of the decision made by the Ohio Department of Taxation and we will be discussing payment plan options with the community and all parties involved. We continue to strive towards building upon our relationships and coming to an amicable solution for everyone."
"The company took a huge black eye from this," Wagner said. "We filed a lawsuit at one point in time for loss of use of property. There was a settlement but that's all I can say about it."
In 2009, the U.S. EPA and Justice Department came down on Lanxess and the next operators of the plant, Ineos ABS (USA) Corp. The two agreed to pay a $3.1 million civil penalty. Ineos also had to spend up to $2 million to install pollution controls and modify operating procedures to resolve violations of multiple environmental laws.
"I feel at some level this [tax appeal] is their ability to stick it to back to the community" Wagner said.
Coincidentally, the district received state funding from a program set up for schools closed because of environmental contamination. The funding covered 50 percent of the cost to build a new school, which will open its doors in a couple weeks.
"We're so excited about that but then there's this almost $1 million hit. That's painful," Wagner said. "We have a $19 million budget and we have to figure out how to repay them when, like most schools around the state and country, there's no surplus."
The district and village could face interest penalties if they take too long to pay back Lanxess.
"There will be [budget] cuts and there are really not many areas to cut anymore," Wagner said. "Our teachers and administrators haven't taken a raise in the last three years. This all still has to go the auditor of the state. Until he makes a ruling, we don't have to pay it, but probably the best-case scenario we're looking at is paying half this year and half next year."
Lanxess Corp. is a unit of Lanxess AG of Cologne, Germany, which had second-quarter sales of 2.14 billion euros ($2.8 billion), down 12 percent vs. the second quarter of 2012, according to an Aug. 6 update on its website.