When the Tax Base Leaves Town: The Fiscal Collapse Facing Coal-Dependent Communities

In Colstrip, Montana, the Colstrip Generating Station has defined economic life for more than half a century. At its peak, the plant and its associated coal mine employed roughly 1,400 people in a town of fewer than 2,500 residents and contributed millions of dollars annually to the Rosebud County tax base. When two of its four generating units closed in 2020, following years of legal pressure from environmental advocates and the economic deterioration of the coal power sector, the fiscal consequences were immediate and severe. School funding contracted. Infrastructure maintenance was deferred. Elected officials began the uncomfortable arithmetic of a community that had built its public services around a revenue stream that was departing.

Colstrip is not exceptional. It is representative.

The Anatomy of Coal Plant Fiscal Dependency

Coal-fired power plants are, from a local government finance perspective, extraordinarily valuable assets. A large generating station can carry an assessed property value in the hundreds of millions of dollars, producing annual property tax payments that dwarf what any comparably sized industrial facility would generate. In rural counties with modest residential and commercial tax bases, a single plant can account for 30, 50, or even 70 percent of total property tax revenue.

That revenue funds the full spectrum of local public services. School districts in coal-dependent counties have historically operated with per-pupil expenditure figures that exceed state averages, not because of unusual policy generosity, but because a single large taxpayer inflated the denominator. Fire departments, county road maintenance programs, hospital districts, and public libraries have all been sized and staffed around revenue assumptions that the coal industry's decline is now rendering obsolete.

The closure timeline is not speculative. The U.S. Energy Information Administration has documented the retirement of more than 100 gigawatts of coal generation capacity since 2010, and the remaining fleet — roughly 200 gigawatts as of this writing — faces continued pressure from natural gas, renewables, and increasingly stringent environmental regulations. Independent analyses suggest that the majority of remaining coal plants are operating at costs that exceed their market revenues, sustained largely by long-term power purchase agreements and regulatory cost recovery mechanisms that are themselves under challenge.

Mapping the Vulnerability

Not all coal-dependent communities face equivalent risks, and understanding the variation is essential for targeting limited transition resources effectively. Research by Resources for the Future and the Brookings Institution has identified several dimensions of vulnerability that interact to determine how severely a community will be affected by plant closure.

Fiscal concentration — the share of total local government revenue derived from a single plant or coal-related industrial complex — is the most direct measure. Counties where coal accounts for more than half of assessed property value have the least capacity to absorb the revenue loss through organic economic growth or tax base diversification.

Geographic isolation compounds fiscal concentration. Communities located far from metropolitan labor markets, interstate highway corridors, or significant natural amenities face structural barriers to attracting replacement investment. A coal plant closure in a rural Wyoming county presents fundamentally different transition challenges than a closure in a community within commuting distance of a mid-sized city.

Workforce demographics add a third dimension. Communities with older average worker ages, lower rates of post-secondary educational attainment, and limited prior exposure to economic diversification face steeper human capital challenges alongside the fiscal ones. Retraining programs that might effectively serve a 35-year-old plant operator may be poorly suited to a 58-year-old one with deep community roots and limited geographic mobility.

Where Transition Efforts Are Working

The picture is not uniformly bleak. A number of communities have made meaningful progress in converting coal-era assets — the land, transmission infrastructure, and workforce skills that plants leave behind — into foundations for new economic activity.

Rockford, Illinois, and the surrounding region have attracted battery manufacturing investment, partly on the strength of existing industrial workforce capabilities and partly through aggressive state-level incentive programs aligned with the Inflation Reduction Act's domestic manufacturing provisions. The transition has not been seamless or complete, but it demonstrates that manufacturing employment can, under the right conditions, partially replace what coal plant operations provided.

In Virginia, the coalfield communities of the southwestern part of the state have benefited from the Virginia Clean Economy Act's explicit set-aside provisions, which require utilities to locate a portion of their renewable energy development in economically distressed former coal regions. The result has been a measurable increase in solar and wind investment in communities that might otherwise have been bypassed by developers pursuing lower-cost sites elsewhere.

The Appalachian Regional Commission and the Economic Development Administration have both directed transition-focused resources toward coal-impacted communities, supporting everything from broadband infrastructure development to workforce training centers. These investments are meaningful, but advocates and local officials consistently describe them as insufficient relative to the scale of revenue loss that closures are generating.

Where Federal and State Support Is Falling Short

The Biden administration's Justice40 initiative and the Interagency Working Group on Coal and Power Plant Communities represented a significant rhetorical and organizational commitment to transition support. The Inflation Reduction Act included bonus tax credits for clean energy projects sited in energy communities — a policy tool designed to direct private investment toward coal-impacted areas. These are genuine advances over the policy landscape that existed a decade ago.

But structural gaps remain. The property tax revenue that coal plants generated flowed directly to local governments; it funded schools and roads without passing through federal or state appropriations processes. Federal transition grants, by contrast, require communities to navigate competitive application processes, demonstrate matching funds, and comply with reporting requirements that smaller local governments often lack the administrative capacity to manage. The mismatch between the immediacy of fiscal loss and the slow, competitive nature of federal grant programs creates a gap that many communities are falling through.

State severance tax funds — mechanisms that captured a portion of coal extraction revenues and dedicated them to transition purposes — exist in several coal-producing states but are typically undercapitalized relative to current needs. Wyoming's Mineral Trust Fund and West Virginia's various coal-related reserve mechanisms were designed for a different scale of transition than the one now underway.

The Renewable Revenue Replacement Question

Utility-scale solar and wind projects offer coal-dependent communities a partial answer to the property tax revenue question, but the substitution is rarely one-to-one. A solar facility generating the same electricity as a coal plant typically carries a substantially lower assessed value, reflecting the difference in capital intensity between the two technologies. Transmission infrastructure, which can carry significant assessed value, may or may not accompany new renewable projects depending on whether it is sited within the affected county.

Some states have begun exploring community benefit agreements that require renewable developers to contribute to local funds beyond standard property tax obligations — mechanisms analogous to the host community agreements used in other infrastructure sectors. These agreements can meaningfully supplement tax revenues, but their negotiation requires local government capacity and legal sophistication that not all affected communities possess.

The fundamental challenge is that coal's departure is removing a fiscal subsidy — the disproportionately large tax contribution of a single industrial asset — that allowed these communities to provide public services at levels their underlying economic base would not independently support. Replicating that subsidy through renewable development, federal grants, or state support programs is achievable in principle but requires a sustained policy commitment that has not yet fully materialized. The communities waiting for that commitment are not waiting in the abstract. They are cutting school budgets, deferring bridge repairs, and making difficult choices about which public services their shrinking revenues can still sustain.