Asset formula

Bond documents reveal $500 million chasm between state and API on asset valuation

Taxpayers could be forced to repay tens of millions of dollars if the county loses its lawsuit

A curious thing happened on the way to the bond market: the Intermountain Power Agency leaked details of its ongoing tax dispute with Millard County to potential investors – details that even local elected officials don’t feel up to. comfortable talking about it in public.

The story appears on page 71 of a 340-page backgrounder released as part of IPA’s recent $797.6 million municipal bond sale, which closed May 12.

The bonds represent the first tranche of financing for the construction of IPA’s massive $2 billion transition project underway at the Intermountain Power Station. As a political subdivision of the state of Utah, the IPA has the authority to sell tax-exempt bonds.

In its disclosure documents, under the title “Dispute,” IPA revealed to potential investors that there was a $500 million chasm between it and state tax authorities dating back to 2014. The dispute centers on the value assigned to IPA assets by the State Tax Commission. Property Tax Division. IPA is a centrally assessed entity and pays fees in lieu of property taxes. Fees are based on his assessment.

In 2014, the division valued IPA’s assets at $829,450,170, according to IPA’s Obligation Disclosure. Counties with IPA assets within their boundaries then used this figure to assess their own charges – IPA is actually Millard County’s largest taxpayer. But then the Tax Division later admitted that it made a “miscalculation” and increased the value it placed on IPA’s assets to $1,031,520,000 for 2014. IPA disputed that assessment – and all appraisals made since – stating that she believed her fair market value for 2014 tax year was less than half that amount, or $499,000,000.

IPA appealed the 2014 valuation established by the division and obtained a reduction of sorts from the Tax Commission, which agreed to assign a value to the entity’s assets of $751,495,000. This sparked a flurry of appeals and cross-appeals filed by both the county and the IPA. The dispute soon landed in the Fourth District Court. Since then, the ongoing litigation has reportedly cost county taxpayers about $500,000 a year in legal fees.

This matter remains in the discovery phase, according to IPA’s Obligations Disclosure. And agreements have been reached to ensure “that appeal proceedings are protected from public disclosure”, although both sides face huge costs depending on the courts’ final decision.

IPA admits in its bond documents that if it loses the case, it could impact the entity’s financial position, although it cannot estimate what those losses would look like. One of the reasons that an estimate of potential losses is difficult, according to the bond disclosure documents, is that the court could decide to assign whatever value it wishes to IPA’s assets, regardless of what the Commission tax did before. And once that decision is made, it cannot be appealed.

But from Millard County’s perspective, a loss in court would likely result in losses of tens of millions of taxpayer dollars across multiple taxing entities, particularly affecting the school district and the county’s general fund.

Eight years of refunds could be due to the IPA from fees the agency has already paid, money local governments have already spent.

Sheri Dearden, the county treasurer, was asked by the Chronicle Progress to do a general math based on the numbers provided in the IPA bond disclosure documents.

She reported that county taxpayers could be liable for about $33 million in refunds, assuming the IPA’s self-assessed value of $499,000,000 remains static for the eight disputed tax years since 2014. , which probably makes Dearden’s calculation conservative.

A single year of repayment could cost the county general fund, say, some $1.25 million. Over an eight-year period, that’s nearly $10 million, more than 2.5 times the annual spending on local law enforcement, or five times the annual spending on recreation.

The school district stands to lose even more, nearly $15 million if it had to repay eight years of inflated fees. And that’s on top of nearly $5 million more in basic school levy funds he may owe over the same eight-year period.

County assessor Pat Manis said a loss in court by the county would likely trigger a judgment levy – an additional amount collected from local property owners on top of what they already owe in regular taxes. . He said the entities concerned could also draw on financial reserves to pay all or part of the costs reimbursed.

“The standard way most entities do this if they don’t have that money set aside is through a judgment levy. It could be substantial. It could increase everyone’s tax burden by 30, 40, 50 percent,” he said, adding that once the 2014 case is decided, that ruling “will likely carry over to other years.”

If such a levy were to be adopted, this would lead to an already drastic change in the local tax burden. Property taxes are already rising thanks to strong increases in market values ​​alongside the impact of expected normal depreciation of IPA assets.

Curiously, the IPA would also see a levy, meaning his own future taxes would rise along with everyone else’s if he were to win in court.

Superintendent David Styler was asked Monday if the school district has about an additional $18 million to repay fees the IPA has already paid. He said he had no such reservations. He said, not wanting to sound presumptuous, that the district would likely go to the IPA and try to broker a deal the two could find acceptable, saying the entities had an overall positive relationship.

Negotiations are underway for a settlement of the tax issues between the county and the IPA.

John Ward, a spokesman for the agency, said recently that the IPA was eager to resolve the issue. A settlement offer was made to the county in February, he said.

County Commissioner Evelyn Warnick confirmed earlier this month that the county had sent a counter offer, the terms of which were not disclosed. A county official said the counteroffer required several weeks of due diligence before it was ready simply because of the complex nature of the IPA offer.

According to an agenda for Monday’s regular IPA board meeting, the Chronicle Progress was granted access to the meeting under a new mandate from the state legislature that the IPA must comply with state open meeting and open documents laws; previously this was not the case – the council had to meet behind closed doors to discuss the ‘valuation dispute’.

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