Friday, December 24, 1999
Utilities win battle for less tax liability
Income hurt for schools, governments
BY SPENCER HUNT
Enquirer Columbus Bureau
COLUMBUS — Cincinnati-area schools and local governments will lose up to $9.5 million in property taxes next year that they used to collect from Cinergy and Cincinnati Bell.
The cuts are the result of a far-reaching agreement state officials announced Thursday that settles 90 property-tax lawsuits filed by Ohio's electric and phone companies. The companies, Cinergy and Cincinnati Bell among them, argue their power plants, equipment and transmission lines have been overtaxed for years to the tune of $4.5 billion.
The agreement shields schools and local governments from having to refund $3.9 billion of the $4.5 billion. In return for dodging that very expensive bullet, the governments agreed to change the way they tax property so the companies pay less.
“Statewide, it's a loss of about $60 million a year,” said Ohio Tax Commissioner Thomas Zaino, who helped broker the settlement. “It is a tax reduction, but it is manageable, certain and relatively small compared to what these governments could have paid.”
The impact on specific school districts, which of all local entities rely most heavily on property taxes, is hard to determine. But school districts that tax power plants are ex pected to lose much more than districts that tax only their phone and power lines.
Also unknown is the effect the decision may have on some homeowners' property taxes. A property tax increase is an option for school district officials looking to make up any heavy losses.
Cincinnati Public Schools could lose $1 million in property taxes next year. District Treasurer Richard Gardner said the revenue loss is “minimal” and already accounted for in the next budget.
“We think we can handle the loss,” he said. “Of course, we'd like to have those dollars, but we were prepared to do without.”
Mr. Gardner said losses may be more dramatic at the New Richmond School District, which taxes two Cinergy-operated power plants — Beckjord Station in New Richmond and Zimmer Station in Moscow.
New Richmond School offices were closed Thursday. Calls placed at the homes of Superintendent Larry Grooms and Treasurer Theresa Napier were not returned.
Cinergy spokesman Steve Brash couldn't estimate the effect on New Richmond schools. But he said Cinergy will save $4.5 million in property taxes next year.
Cinergy paid about $124 million in property taxes this year, most of which went to schools and governments in Southwest Ohio. Mr. Brash said the settlement was good for governments because they avoid refunding Cinergy up to $21.7 million.
“We recognize the impact a refund that size would have on taxing districts, especially public schools,” Mr. Brash said.
Spokeswoman Libby Korosec was unable to say how much Cincinnati Bell wanted in refunds. She estimated the settlement will save the company $5 million in property taxes next year.
The phone company paid $26 million last year, the bulk of it to Hamilton County governments.
“We believe this (settlement) allows us to contribute our fair share of taxes while not taking away money already committed to fund schools,” Ms. Korosec said.
In Columbus, Mr. Zaino warned that not all tax issues have been resolved. There are still several lawsuits filed by other utility companies that have not settled, he noted.
The settlement does appear to end arguments over some complicated tax issues, such as what equipment can be taxed as property, and how fast property can lose value over time.
But a critical question concerning how much property can be taxed is still unresolved. While most businesses pay a tax based on an amount equal to 25 percent of their assessed property values, utilities pay a tax based on 88 percent of their property values.
Utilities that argue they should be taxed more like other businesses could still sue, for as much as $600 million in overpaid taxes, Mr. Zaino said.
While Mr. Brash said this settlement ends Cinergy's property tax fight, Ms. Korosec was less specific about Cincinnati Bell's future legal plans.
“I can't speak to that,” she said. “At this time, we're not pursuing it.”
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