THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, February 29, 1996 TAG: 9602290292
SECTION: BUSINESS PAGE: D3 EDITION: FINAL
SOURCE: BY ROBERT LITTLE, STAFF WRITER
DATELINE: RICHMOND LENGTH: Medium: 78 lines
The General Assembly moved closer Wednesday toward offering $188 million in tax credit to the state's struggling coal producers, an adrenalin shot for the Southwest Virginia economy.
Supporters hope the move will save thousands of jobs and preserve an industry woven into the region's character. But others call it just a temporary fix - a delay in the inevitable death of Virginia's once-mighty coal industry.
``It's almost deceptive to give a tax credit that will allow this industry to avoid the economic realities,'' said Sen. Joseph V. Gartlan Jr., D-Fairfax, who opposed the measure. He proposed using the money to develop other industries in the region.
``When this tax credit stops - when the economic realities of the industry assert themselves one more time - we will have done nothing but applied a Band-Aid to keep this industry from shutting down.''
The Senate's Finance Committee voted overwhelmingly in favor of the credit, which would be phased in over five years beginning in 1999, then phased out over five more. Coal companies can accumulate the credit starting immediately, but won't be paid for them until 1999.
Sen. William C. Wampler Jr., R-Bristol, said 1,000 coal industry jobs were lost in the past six months, a trend the tax break is designed to at least stall.
The House of Delegates passed the measure earlier, so it needs only approval from the full Senate and the governor to take effect. Wednesday's vote bodes well for the bill's fate in the Senate; the governor has not taken a position.
Much of the Virginia coal industry's troubles are a product of the state's depleted coal reserves. Many coal deposits are so narrow that mining them is no longer profitable. The tax breaks would be offered as an incentive for companies to mine the coal anyway.
State finances are tight this year, however, and the plan only gained support once lawmakers agreed to delay its implementation beyond the two-year budget they must approve this year.
Supporters presented the issue as a payback of sorts, noting that Southwest Virginia lawmakers have supported such regional projects as the Hampton Roads ports, the Washington-area Metro and Disney's America.
``Without this, we're going to have areas like Virginia Beach and Tidewater that continue to grow at everyone's expense,'' said Sen. Charles R. Hawkins, R-Danville. ``We'll have six-lane highways and BMWs and high-rise condominiums in one region, and across the state everyone's starving to death.''
That lawmakers could vote without immediate concern for the state budget took much of the sting out of a vote already cluttered with powerful regional and emotional concerns. Only two of the committee's 17 members opposed the measure.
Mining accounts for 18 percent of the work force in five counties of Southwest Virginia, making mining the largest sector of the area's economy. And the second largest in that coalfield region, retail, is tightly linked to the health of the coal industry.
A University of Virginia study prepared for the legislature last year suggested that little can be done to protect the long-term health of the industry. But supporters of the tax credit say the measure will buy time for the region to diversify and lessen its dependence on coal.
``If you have lived in this part of the state, if you have grown up in this part of the state, it pains you to see headlines . . . saying this is a dying industry,'' said Del. C. Richard Cranwell, D-Roanoke County, sponsor of the bill.
``I can't guarantee you that you're going to save the coal industry, I can't even guarantee you you're going to help tremendously,'' he said. ``But you're not going to hurt.''
Cranwell said he talked with one coal producer who would move his operation to West Virginia without the increased tax credit.
``Maybe it's not as concrete and sound as Motorola and IBM, but, in my view, a job is a job and a job lost is a job needed,'' said Sen. Stanley C. Walker, D-Norfolk.
KEYWORDS: GENERAL ASSEMBLY COAL INDUSTRY TAX CREDIT by CNB