Friday, May 25, 2018
Business

Citrus County faces budget crisis as Progress Energy pays only part of its tax bill

Progress Energy Florida plunged Citrus County into a budget crisis Wednesday after the utility refused to pay almost half of its $35 million property tax bill. The County Commission and School Board scheduled emergency meetings for Friday to cope with millions in missing revenue.

Progress, which merged with North Carolina-based Duke Energy in July, submitted a payment of about $19 million. The utility — by far the largest taxpayer in this rural county of 140,000 people — argues that the appraiser has overvalued its Crystal River power complex and other local assets.

"Progress Energy/Duke Energy has submitted a tax payment that is approximately $15 million less than what the Citrus County Property Appraiser says is their responsibility, based upon the certified tax rolls," Commission Chairman Joe Meek wrote in a statement.

"In doing so, it directly threatens Citrus County's ability to fund its school system, community services, environmental protection, law enforcement and fire protection and negatively impacts our very quality of life."

Citrus officials also say they believe Progress' action will have a negative impact on the county's bond rating, which could make it more expensive to borrow money.

Progress' taxes make up 26 percent of the tax base in Citrus County, which is about 65 miles north of St. Petersburg.

The potential loss of revenue would cut more than $8 million (3.4 percent) from the current school budget and more than $7 million (3 percent) from the County Commission's budget.

Sandra "Sam" Himmel, the Citrus school superintendent, said she does not plan layoffs, but making up the shortfall will be difficult.

"We don't have a lot of play in our budget," Himmel said. "We're going to have to look at ways in all different areas to cut back. Our plan is to last at least until the end of the school year."

Utility spokeswoman Suzanne Grant said it has been in negotiations with the property appraiser for two years but could not reach an agreement on the value of the Citrus properties.

Grant said that as a result, Progress decided to make the $19 million payment and on Friday will file suit against the county in circuit court over the disputed value of the property.

"We believe that the valuation of our properties is overstated," Grant said. "We worked to try to resolve the differences.

"This is not an issue that has come up overnight,'' she added.

Grant noted that a lower tax bill for the utility would be good for Progress' customers, who ultimately pay that bill.

Progress says the property appraiser has overvalued the broken Crystal River nuclear plant, which has been out of service since 2009, and the $1.5 billion pollution control systems on two coal-fired units at the power complex.

Grant says the county based its assessment on the cost of the pollution control systems rather than their salvage value, as it should have. She added that customers will no longer pay operating and maintenance costs for Crystal River's nuclear plant after Jan. 13, so that, too, should reduce the property's value.

Geoffrey Greene, the Citrus property appraiser, said the utility has tried since 1998 to reduce its property tax bill. He said Progress lacks legal standing for the tax break.

Contrary to Progress' assertion, Greene said, the pollution control system has been properly valued and affirmed by the Citrus County courts. As for the nuclear plant, he said the value is determined based on the property's status as of Jan. 1, when Progress will still be collecting operating and maintenance costs from customers.

"We've been negotiating since 1998, every year," Greene said. The only thing that has changed, he said, is "just new players with the Duke merger."

Greene said negotiations with Progress have been friendly over the years, despite the utility's desire for a lower bill.

"Basically on a handshake we agreed on a number,'' he said. The 2013 tax roll was certified on Oct. 2, and Greene said he had no indication of Progress' intentions until Oct. 30.

He said Duke's senior tax representative, Keith Butler, came in and announced that the utility would pay only $19 million.

Greene said a court fight over the tax bill could take years.

"They (Duke) leverage the cash flow of the county" to make it harder to fight the litigation, Greene said.

He said Duke did the same thing in Ohio several years ago, referring to a long-running dispute between the utility and the Ohio Department of Taxation, which Duke said over-assessed the value of the company's equipment and property, resulting in $40 million in extra taxes.

According to the Cincinnati Enquirer, Duke told school districts in June 2010 that it would withhold $20 million worth of payments until the case was resolved.

According to the Enquirer: "The information came just days – in some cases minutes – before school boards were to submit their budgets to the state, leaving districts little time to react.''

The state tax commissioner "largely rejected'' Duke's request in 2010, according to a utility fact sheet from 2011. The fact sheet said Duke was paying about 90 percent of its 2009 and 2010 taxes pending resolution of the dispute.

"We voluntarily agreed to these payments because of strong feedback from local governments against our proposed tax reductions,'' the utility said.

Duke reached a confidential settlement in the Ohio case in May. "We're pleased with the settlement,'' said Sally Thelen, a Duke spokeswoman.

How Florida's tax battle with the utility plays out remains unclear.

Rep. Mike Fasano, R-New Port Richey, said he was deeply troubled by the latest actions by the utility. He said Progress' merger with Duke appears to signal that Florida is becoming less of a concern for the new company.

Duke Energy has more than 7 million customers, with 1.6 million in Florida.

"Their actions tell us a lot about Duke Energy," Fasano said. " 'We don't care about Citrus County, we don't care about Florida' is what they're saying.

"Shame on them for their actions, for putting an entire county at a financial risk," he said. "You would hope our Florida Public Service Commissioners' eyes would be opened."

Ivan Penn can be reached at [email protected] or (727) 892-2332.

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