And as the rest of the state watches to see what the impact might be, local districts are calculating the cost to their immediate budgets if they have to pay Duke back with interest once the matter is resolved, and future budgets if that revenue stream declines. That price tag increases with each year the matter is in limbo.
“If they were to win their appeal for a particular year, we’d be very concerned about the future years as well,” Fairfield City Schools Spokesman Randy Oppenheimer said.
Duke recently filed a petition with the Ohio Department of Taxation challenging the assessment of its tangible personal property tax value for tax year 2009. Last month, the company told local leaders it planned to withhold 20 percent of the second half of its annual tax bill based on its own analysis of what it felt was fair, while it appeals the state’s initial assessment of the company’s personal property value. Tangible personal property includes equipment, poles, wires and machinery, but not real property such as buildings and land.
Following a public outcry from government leaders, as part of its appeal process, Duke agreed to pay its bill at 90 percent of the full-year assessment. If it wins its appeal, recipients of its tax money would pay back the difference with interest. If the state upholds the value, Duke would pay the difference with interest.
Duke Spokeswoman Pat Hoffmann said Duke feels the state uses an assessment that “significantly over values our property.”
Ohio determines property value based on historic costs of property minus depreciation values, she said, but Duke wants the state to look at fair market values.
“Hopefully, they’ll come up with a solution that is going to be less damaging to all the tax recipients involved,” Hutchinson said, praising Duke for being responsible in its appeal process. “Any revenue right now is critical to us.”
“It was going to hurt everybody involved and it was so sudden. This buys time for those involved. I think they’ve done the responsible thing in responding to this. I just hope that ODT and Duke can come to a quick settlement.”
Monroe Superintendent Elizabeth Lolli said she is “pleased” with Duke’s compromise, because planning ahead is key to her school district.
“At this time, we’re past the point of being able to cut programs for this school year,” she said.
According to Amanda Wurst, spokeswoman for Gov. Ted Strickland, the governor was concerned with the immediate negative impact Duke’s decision had on school districts, but recognized its decision to pay 90 percent of its 2009 taxes as a sign of collaboration moving forward.
“However, there is still a long-term issue at hand that could have significant consequences for not only southwest Ohio schools, but schools around the state,” she said. “Because this situation threatens the reliability of local funding sources for our schools, the governor believes the best way forward is to work closely with members of the legislature and representatives of Ohio schools.”
The typical tax process, said John Kohlstrand, communications director for the Ohio Department of Taxation, is that public utilities annually submit their tax return to the department, which applies the law to determine the value of the personal property for tax purposes. That is communicated to the counties, which bill the utilities. Public utilities are considered electric, natural gas, pipeline, water works, water transportation and heating companies, according to state law.
If a dispute occurs, a utility company may file a petition with the state tax commissioner, Kohlstrand said. The commissioner makes a decision, often within several months. That decision may be appealed to an independent state Board of Tax Appeals — a process that could take months or years depending on the case. If that decision is challenged, it goes to the Ohio Supreme Court.
“Public utilities are among the largest property taxpayers in Ohio,” Kohlstrand said. “So, without question, when there is a dispute about the value of public utility personal property, it is understandable that educators would be concerned. Disputes over the value of public utility personal property do have the potential to ultimately result in less revenue for school districts.”
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