Oklahoma offers property tax breaks to businesses. Now lawmakers want to change the rules

For 40 years now, legislators have been utilizing a state program that offers a tax break to manufacturers willing to come to Oklahoma. In exchange for opening up shop, qualifying manufacturers earn a five-year property tax exemption, meaning they don’t have to pay a key tax that counties, schools, libraries, health departments and other local entities rely on to operate.

In 1985, voters decided that it’s fine for lawmakers to offer this exemption as a way to draw new businesses and jobs, but they prudently included a constitutional requirement that ensures the Legislature covers the missed money for the local entities that would otherwise benefit from the taxes generated by these big businesses. 

Reminder: The state doesn’t receive revenue from property taxes. Only local and county governments do.

For years, lawmakers faithfully paid the tab. But now that more businesses are utilizing this credit and property valuations are increasing, lawmakers no longer want to have to pay the piper.

So they want to change the rules, and they want the public to help.

They’re asking Oklahomans on Aug. 25 to vote on a state question that would grant the Legislature the power to calculate how much — or how little — schools and counties should be reimbursed for lost revenue. They plan to do so in such a way that no one county receives reimbursements that would be “a detriment to other counties in the state.” 

Don’t forget, our lawmakers also set the parameters of who qualifies. Local governments don’t have any say in that, though they will certainly feel the pain if the Legislature starts mucking around with their reimbursement calculations.

Legislators contend that the $88.6 million the state had to pay in reimbursements last year is too much. Of that, about 73% supplemented public school losses.

They’re also bellyaching that this program disproportionately benefited a few counties. 

For instance, about 40% of reimbursements are currently being allocated to Mayes County, which boasts Pryor’s booming MidAmerica Industrial Park in northeast Oklahoma. 

Imagine that. The reimbursement is disproportionately affecting a location that our state’s economic development officials have been actively recruiting businesses to. It wasn’t many years ago that our lawmakers were involved in an unsuccessful quest to lure a massive Panasonic battery plant to the same county that they’re now complaining about. 

I remember a legislative study a few years ago that featured lawmakers befuddled that the price tag for this program had soared amid a rise in qualifying projects, which at the time included wind farms and some oil and gas infrastructure. 

In short, this has been an ongoing issue for years.

Republican House Speaker Kyle Hilbert told Oklahoma Voice that the Legislature doesn’t intend to change any existing reimbursement rates. Lawmakers only want to intervene in new deals.

Hilbert said lawmakers want to have input if a manufacturer’s property value assessment is too high. The state is on the hook for paying the tab regardless of what the property is assessed at and has no ability to contest it, he said.

There are plenty of other options to solve this than legislators going nuclear and inserting themselves in a property assessment process that they have no expertise in.

Why don’t lawmakers give themselves the power to contest these valuations?

Why not pass legislation requiring that counties hire a previously agreed upon independent assessor, who specializes in these valuations — on the state’s dime — as a stopgap to the county’s work to ensure these developments are properly valued?

Or why not insist the tax program be eliminated entirely if it’s too expensive? Legislators have disqualified wind farms and data centers and plan to phase out solar farms. We have plenty of other needs in this state that could use that money.

Legislators don’t want to get rid of it because it’s a handy tool for economic development leaders to dangle in front of prospective businesses.

The other problem is Hilbert and pretty much every other current lawmaker isn’t going to be in office 10 years from now due to term limits. There’s nothing to stop future legislators from reneging on his pledge, particularly if budget times get tough like they always seem to. 

And if we lift the guardrails, there’s nothing to stop lawmakers from expanding this program to even more industries when they have even less skin in the game.

If legislators like what’s on the menu, then that’s fine. If not, they have the power to change it.

But if we’re going to change this, it should be for the betterment of all and not the detriment of local governments whose communities have been able to capitalize on our state leaders’ push to diversify our economy.

Like ships on an ocean, we all rise and fall together. Our already cash-strapped schools and counties shouldn’t be left footing the bill for this program.