Utility lawsuit ties up millions in tax revenue

An ongoing legal dispute with Ameren Missouri has tied up millions of dollars in potential local tax revenue, with much of that money being held back from local school districts.

Since 2013, Ameren has paid property taxes on its natural gas distribution systems in 16 counties - including Cole, Callaway and Moniteau - under protest. The utility company claims the assessed valuation of its property in those counties have been too high, so its tax bills have also been too high.

Ameren has previously appealed to governmental bodies including Cole County's own Board of Equalization and the State Tax Commission, but rulings there have favored the counties' position.

The state Supreme Court in May was set to take on the enjoined case of the disputes over the 2013 assessments, but earlier this month, the court sent it back to the lower appeals courts, according to the St. Louis Post-Dispatch.

For as long as the legal battle continues, the property taxes Ameren has paid under protest remain locked in escrow with the counties - revenue that has not been flowing into the budgets of taxing districts like public schools, fire departments, libraries, public works, the counties and the state.

Cole County Collector Larry Vincent told the News Tribune the balance in Cole County's protested payment escrow account totals more than $2.6 million, and at least 95 percent of that sum is from Ameren's protested payments.

In total, from the years 2013-16, the Jefferson City Public Schools district's share of the money in the county's escrow account is $1.754 million, said Jason Hoffman, JCPS chief financial and chief operating officer.

So long as the money is contested, the school district has not been able to budget it as income.

Hoffman was confident the counties will eventually win, but even if they do, they'll only receive the contested money from 2013 - $388,250.80 for JCPS.

Ameren could still decide to fight in the courts over assessed valuations for 2014, 2015 and 2016.

Scott Huber, Ameren Services' associate general counsel, said the 2014 and 2015 disputes have been consolidated for a hearing to occur in late August, and there's no real scheduling for 2016 yet.

Jim Jones, Blair Oaks R-2 superintendent, said the running total at stake for his district from 2013-16 is more than $50,000. Jones said it's "extremely small in comparison, but it is an amount."

If the case is won and school districts receive their owed property tax revenue for 2013, the one-time payments couldn't be used for staff salaries, but teacher salaries can help put in perspective what districts could have been funding if they had been able to budget the money.

Hoffman said one full-time teaching position at JCPS costs $57,000 with benefits, so what's at stake is roughly the equivalent of six or seven full-time teachers every year.

In Cole County alone - including JCPS' share - Ameren's protested payment for 2013 is $580,036.61:

The Cole County R-1 (Russellville) school district can claim about $22,000;

The Blair Oaks R-2 School District about $12,600;

Jefferson City, more than $60,000;

The Missouri River Regional Library, more than $21,000.

With JCPS, those four entities entered into a defense cost-sharing agreement with the county. The county agreed to pay the first $118,405.87 half of estimated litigation costs; the county originally estimated its share of the more than $1 million joint legal defense cost for all 16 counties would be $236,811.73.

The five other taxing jurisdictions in the county agreed to pay subsequent costs beyond the county's obligation, up to $118,405.87, according to the proportion of tax dollars received.

Of the budgeted half for the other taxing jurisdictions, JCPS had the biggest obligation at $91,082.83. Hoffman said the district paid just over $33,000 last year, and the county is now asking for the remaining $58,000.

However, Debbie Malzner, the Cole County Commission's finance officer, told the News Tribune the county's legal fees have well exceeded that original estimate and now total more than $395,000 for the 2013 dispute alone.

Malzner said the county has not yet asked the local school districts and other bodies to pay anything more.

Though they aren't obligated to help pay for legal expenses, other county agencies also have thousands of dollars at stake out of the money in escrow from 2013, including more than $33,000 for Public Works, almost $11,000 for Special Services and more than $1,000 for the county fire district.

The heart of the dispute is differing opinions over how the counties should have factored depreciation into their assessments of Ameren's natural gas infrastructure.

The counties calculated depreciation from an "original cost" figure - the price the current owner, the taxpayer, paid without freight, installation or sales or use tax.

The State Tax Commission ruled Ameren had incorrectly made downward adjustments to the original cost figures it wants used.

However, from Ameren's point of view, it's less a question of depreciation calculations but about "appropriately accounting for depreciation versus not (at all)," said Warren Wood, Ameren Missouri's vice president of external affairs and communications.

Huber said the reason Ameren lost its State Tax Commission case was the hearing officer ruled Ameren did not present a satisfactory burden of proof of any malfeasance by the counties - an evidentiary issue Ameren claims it has fixed going forward.

Wood said if Ameren had to pay the amount the counties ask for, the average customer across its natural gas system would have to pay $1 a month more.

"This isn't something Ameren makes any money on," Wood said, adding of the $591 million in property taxes Ameren paid from 2013-16, only $8.6 million was paid under protest - about 1.5 percent.

He said the company's priority is its obligation to customers not to let what they view as unnecessary levels of taxation get passed on to them.

Cole County Assessor Chris Estes told the News Tribune Ameren's underground gas transmission lines in the county are worth about $60 million.

Ameren could not immediately provide its own estimation but confirmed the company has invested tens of millions of dollars in underground natural gas infrastructure in Cole County.

The other counties involved in the dispute are Bollinger, Butler (Poplar Bluff), Cape Girardeau, Cooper (Boonville), Howard (Fayette), Lincoln, Montgomery, Pike (Bowling Green), Ralls, Randolph (Moberly), Scott (Sikeston), Stoddard and Warren.

Huber said Butler County provided depreciation in its 2016 assessment, so it is not involved in the dispute for that year.