Protested taxes leave schools in pinch
Ameren tops all utilities in protests; JC school board eyes shortfall
Tuesday, February 11, 2014
Revenues for the Jefferson City Public Schools are down $439,000 after several corporations protested their Cole County property tax bills last summer.
The bulk of the protested taxes, about $355,833, is owed by Ameren Missouri. However, a dispute over how the corporation’s natural gas distribution lines should be assessed opened the door for the utility to protest its tax bills — which it has in 17 counties.
The “assessed property” in question are the natural gas distribution systems delivering fuel to Missouri’s homes, businesses and industries.
The utility’s decision to contest its tax burden means, at least in the near term, school districts and other taxing entities across the state will be coping with millions of dollars in revenue shortfalls in the months — and probably years — to come.
The problem came to light locally last year after informal meetings between utility representatives and the Cole County Assessor’s Office failed to lead to a resolution. Using formulas that have been in place for a long time, staff with the assessor’s office estimated the real property value of Ameren’s natural gas distribution lines at $53.2 million. Ameren argued the same lines were valued at $20.4 million.
An appeal to settle the discrepancy was held July 26 by the Cole County Board of Equalization, which is staffed by the three county commissioners, two city officials and two at-large members — Ken Otke and Dana Wildhaber — who have ties to construction and real estate industries.
“The board unanimously decided ‘no change,’ upholding the assessor’s value,” Assessor Chris Estes explained.
In a related dispute, Ameren last year also appealed assessments of the corporation’s personal property holdings, Estes said. He noted his staff valued it at $6.9 million, compared with Ameren’s $2.8 million estimate.
“On this, the Board of Equalization accepted Ameren’s value,” Estes said.
Ameren isn’t the only utility to appeal its assessments. Other Missouri utilities that operate natural gas distribution systems also have protested their assessments, Estes said.
It’s not entirely clear why the utilities chose to appeal their tax burdens in 2013. Ameren officials were not available to comment on the situation by deadline Monday.
Resolving the challenges
The Board of Equalization’s decision isn’t the end of the road for this debate. The next step is the Missouri State Tax Commission.
Maureen Monaghan, chief counsel for the commission, said a hearing officer — Luann Johnson — has been assigned to the case. The commission’s process is not unlike a judicial hearing, with evidence collected and shared. Although a hearing date hasn’t yet been scheduled, ultimately Johnson is expected to render a decision.
Even that isn’t a final outcome. If the parties don’t like Johnson’s conclusion, the case can be appealed to the three-member Missouri State Tax Commission, to the circuit courts and ultimately to the state Supreme Court, although that is rare.
Estes noted all the cases — with the exception of Boone County’s, where money held in escrow exceeds $2 million — are on hold. Estes said the other counties, like Cole, are waiting to see the outcome of Boone County’s litigation efforts.
Ultimately he believes a new mass appraisal system for natural gas distribution systems will be created.
“We can use that one as a pattern,” he said.
Although it’s not certain why the utilities chose to protest how property is assessed, a few people familiar with the situation suggested it might be due, in part, to a lack of clarity regarding whether or not the natural gas distribution systems should be depreciated or not depreciated.
It depends on how one views the system: Is a natural gas distribution system personal property that ought to be depreciated? Or are the lines “fixtures” attached to the ground in the same way that an underground water line is attached to a house … i.e. real estate?
Estes said he feels his responsibility is to make sure that everyone — from homeowner to corporate officers — is treated fairly by the assessment process. He noted that introducing a depreciation schedule might tilt the balance, which is why many county assessors appear have rejected it.
“If we are going to start using special formulas (like a depreciation table) to appraise corporate property, are we being fair to the residential taxpayers whose property is assessed on fair market value?” he asked.
“The job of the assessor is to make sure everyone is on the same playing field.”
In the midst of a tax protest, the funds were supposed to be held in escrow until a final outcome is determined by the Missouri State Tax Commission or the courts.
However, because of a software glitch in the Cole County Collector’s Office, the funds that should have been escrowed — some $647,000 — were inadvertently released. Collector Larry Vincent said he is communicating with Cole County’s taxing bodies to find a resolution to the situation.
School board eyes deficit
At Monday night’s meeting the Jefferson City Board of Education agreed to Chief Financial Officer Jason Hoffman’s request to approve a budget amendment to take the revenue shortfall — and a few other budgetary tweaks — into account.
Hoffman noted that half of the district’s revenues come from property taxes these days. Most of theses taxes — some $33 million — are paid in November and December and flow into the school’s coffers in January.
Hoffman told the board that Boone County Assessor Tom Schauwecker has taken the lead.
“He thinks the county will win, but it will take possible years,” Hoffman said.
Until then the escrowed funds are likely to grow and even earn a little interest income.
Although the school districts revenues decreased, expenditures were down as well. For example, because more of Jefferson City’s school children are eligible for free lunches, the district is seeing $150,000 extra flow in from federal nutrition programs. However, because more meals are being served, the cost of food supplies are up $130,000.
Also, the district has spent more this year to add bus routes and have staff monitor student behavior on some of the but routes. But salaries are also running below — about $500,000 less — what Hoffman predicted they would.
“That’s welcome news,” he added.
Over all the net change was only $17,000, leaving the district a still-healthy fund balance of 24 percent.
“We’re fortunate that we have expenditures that were down,” Hoffman said.
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