Franklin paper mill closure to shrink tax coffers

Nov 08, 2009 (The Virginian-Pilot - McClatchy-Tribune Information Services via COMTEX) -- IP | Quote | Chart | News | PowerRating -- For now, International Paper Co. is one of the largest taxpayers in Isle of Wight County, and the children of some of its employees attend the relatively small school system in Franklin.

Thus, those two school divisions have much to worry about now that the company will close its plant near Franklin, at a cost of some 1,100 jobs. Part of the problem, officials in both localities say, is that they don't know exactly what they will face. Whatever it is will come at a bad time, though, as the state seems likely to consider whether to reduce its spending for public education.

Franklin Mayor Jim Councill said he's considering many scenarios. Will his city's schools lose enrollment because families are moving elsewhere for jobs? Or will they gain enrollment because parents can no longer afford private school tuition? Will the plant closure, paired with the already slow economy, equal double trouble for tax revenue?

Isle of Wight County schools Superintendent Mike McPherson said he's taking a wait-and-see approach.

"Right now that's about all we can do," McPherson said. "Some of these things we just can't predict."

The School Board has scheduled a work session at 6 p.m. Thursday at the county's courthouse complex to discuss the fiscal impact.

Regionally, an estimated $19.2 million in state tax revenue and $13.5 million in local tax revenue could be lost with the plant closure, according to a Virginia Economic Development Partnership analysis. The report's "impact areas" include Isle of Wight, Southampton, Surry and Sussex counties, as well as the cities of Franklin and Suffolk.

International Paper is Isle of Wight's No. 1 personal property taxpayer, with an annual contribution of $5.7 million -- nearly 30 percent of the county's personal property tax revenue. Three other businesses among the top 10 personal property taxpayers have closed recently or are set to close in the coming months.

Real estate taxes -- the second primary source for local funding of schools -- could also be in jeopardy. During a presentation Thursday to the Board of Supervisors, Commissioner of the Revenue Gerald Gwaltney said the tax rate may need to increase by 12 to 14 cents in fiscal year 2012 unless lost revenue is replaced.

"A significant number of our revenues are derived from the mill," said county spokesman Don Robertson. "Bottom line for us, there's going to be an impact. It's just a matter of how much."

Franklin officials don't have a full handle on how much tax revenue it will lose, Councill said. The local cost of education equates to all of the real estate taxes collected and half of the personal property taxes collected, he said.

The city receives a percentage of tax revenues generated in a geographic area that contains the mill, located in Isle of Wight at the Franklin border. The revenue-sharing agreement provides the city with about $1.3 million, or about 5 percent of the general fund, Councill said.

"Probably 80 percent of that is from that one plant," he said.

City officials fear the mill closure could leave a glut of homes on the market and continue to drive down real estate values. Councill said he's been relieved to hear from International Paper employees who don't want to leave.

"This is our home. We love it here and we're staying. That has been the prevalent comment," he said.

Local funding accounts for about 43 percent of the Isle of Wight school division's $61.2 million budget and about 36 percent of the Franklin school division's $13.3 million budget.

In Isle of Wight, any revenue loss could result in the delay of capital projects, including the construction of a new Windsor Middle School, Robertson said. McPherson, the superintendent, said the roughly 5,600-student school division will take smaller hits as well. International Paper has awarded grants to Isle of Wight teachers and donates "truckloads" of copy paper to the schools.

Franklin schools Superintendent Michelle R. Belle said she's still trying to determine how many of her roughly 1,300 students have parents working at the mill.

Instruction remains the focus, Belle said, but Franklin's three schools are turning into "quasi-social services" agencies to accommodate students whose parents are laid off.

Administrators and teachers are watching for changes in student behavior and reassuring anyone who's upset or frustrated.

"I'm trying not to worry," Belle said, "and I don't want my people to worry."

Hattie Brown Garrow, (757) 222-5562, hattie.brown@pilotonline.com

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