A number of area companies, including some already benefiting from lucrative tax incentives, took legal action to obtain lower property tax rates last year — a growing trend that has school officials concerned about the possible impact such reductions might have on local revenues.

At the beginning of Fiscal Year 2017, the Mobile County Public School System projected $117.9 million in local property tax revenue, but when all was said and done, those revenues ended up closer to $109 million.

Last week, Superintendent Martha Peek said that $8 million gap in projected funding was directly attributable to businesses that received tax reductions or refunds, which Peek said has been an increasing occurrence over the past couple of years.

“The school system noted a decrease in revenue in 2016 and at that time contacted the Revenue Commissioner’s office and learned the revenue decreased because a large steel manufacturer appealed [its] property tax rate and it was lowered,” Peek wrote via email. “At that time, it was shared that several other large businesses and corporations were [also] appealing.”

Under the law, any citizen — corporate or otherwise — can challenge the property tax rate assigned to them by the Mobile County Revenue Commission, assessed annually around July. Last year, more than 6,500 people filed petitions challenging their evaluation.

According to Tyler Pritchett, an attorney for the Mobile County Revenue Commission, the number of challenges more than doubled in 2016 because there was, on average, a 16 percent increase in property tax rates throughout Mobile County.

In some of those cases, residential property owners saw their their evaluations increase by tens of thousands of dollars, and for most businesses, the increase in value was likely even higher.

When an owner challenges their assessed value, it’s heard by the Mobile County Board of Equalization. Even if the board sides with the revenue commission’s appraisal staff, taxpayers can file a civil lawsuit against the Board of Equalization in Circuit Court.

A handful of companies have been doing just that over the past few years, including some already benefiting from tax breaks offered as economic development incentives. In 2016, Creekline Inc., North Royal Properties, Outokumpu, AM/NS Calvert, Lowe’s Home Centers and Marelda Bel-Air Mall all successfully sued to reduce their respective tax rates.

At this point, it’s unclear what the individual value of those reductions were, but their combined impact to MCPSS was $8 million, according to projections provided by the Revenue Commission.

Kenneth C. Kvalheim is the current chairman of the Board of Equalization, while he acknowledged every resident’s and business’ right to challenge the property tax evualations, he said part of the board’s role is given away in the title.

“The board is a taxpayer advocate,” Kvalheim said. “We’re an advocate so they can protest evaluations, but at the same time we make sure that everyone is treated fairly and equally under the tax code.”

While he didn’t name any specific company, Kvalheim said he “absolutely” stood by the board’s decisions on property evaluations challenged last year, adding that many “didn’t present any evidence contrary to the Revenue Commission’s” initial evaluation.

One exacerbating issue for some is the fact that a few of the companies filing suit over the property tax rates already benefit from existing tax breaks.

Before it was sold and split into Outokumpu and AM/NS Calvert, ThyssenKupp’s facility in Calvert had netted German steel conglomerate tax breaks and public contributions exceeding $1 billion. In 2015, Mobile County’s Industrial Development Authority abated another $8.5 million in a decade of tax breaks for AM/NS Calvert as the company touted a $88 million expansion.

When local incentives are approved, state law mandates that education taxes are not abated. Yet in some cases those educational ad valorem taxes are all that is left when companies seek a reduction in the taxes they are required to pay.

AM/NS Calvert Communications Director Scott Posey said the company’s efforts to have property taxes reappraised aren’t uncommon when large property transactions take place. He said the Board of Equalization granted a request to reappraise those values in 2014, but court records indicate AM/NS Calvert filed suit when the board denied a similar request last year.

Posey also pointed out that, aside from its tax contribution, AM/NS Calvert provides “financial support for a variety of important education initiatives” at numerous public schools. Asked about those types of industry partnerships, Peek said MCPSS recognizes “profits are the goal of business and industry and that a reduction in property tax is a business transaction” to them.

While an $8 million gap in expected funding is never welcomed, the lost revenue hasn’t substantially impacted MCPSS. Because of the overall increases on parcels across the county, the school system actually received close to $2 million more than it did the previous fiscal year.

Peek said when the decreased revenue became apparent, adjustments were made to avoid any impacts in the classroom, adding “MCPSS is in good financial condition.” Additional timber was harvested from the district’s land leases and funding was pulled from positions and programs in the central office that Peek said “were not essential.”

Together, those efforts secured roughly $13 million dedicated to meeting a state requirement that every school system maintain the equivalent of one month’s operating expenses in a reserve fund balance.

For MCPSS, it would take $36 million to fund a month of operation, though currently only $16 million has been set aside for that purpose. The district had budgeted to contribute more prior to losing revenue to last year’s tax reductions.

While this year’s setback may have been minor, Peek expressed concern that more companies might see the success of recent requests for tax reductions and follow suit. In fact, more than 10 companies have already filed suit against the Board of Equalization this year. Those include Austal USA, the Country Club of Mobile, CR Farms, Evonik Corp., Group 1 Realty, Lowe’s Home Center, Mitsubishi Polycrystalline Silicon America, North Royal Properties, Outokumpu Stainless USA and Washington Plaza Affordable Housing.

“Property tax and sales tax revenues are main sources of revenue,” Peek said. “Any continued loss of funds are of concern because adequate funding is needed to provide quality programs, services and support to the schools.”