State to fund tax appraisals for dams
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Water rushes under the open Bellows Falls dam as workers work to repair it. Vyto Starinskas / Rutland Herald |
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By Susan Smallheer STAFF WRITER - Published: November 30, 2009
Concerned that Canadian energy giant TransCanada has Vermont towns over the proverbial tax barrel, the state of Vermont will pay to update property tax values on a series of hydroelectric dams on the Connecticut and Deerfield rivers owned by TransCanada's Hydro Northeast.
Tucked into the 2010 state budget is a $200,000 line item for a state-funded reappraisal of the dams, which range from the giant Moore Dam in the Northeast Kingdom to the recently refurbished 1909 Vernon Dam, a virtual stone's throw downstream from the Vermont Yankee nuclear reactor.
At stake is millions of dollars in tax revenue.
Sen. Jane Kitchel, D-Caledonia, said that a meeting last winter with frustrated leaders in the small Northeast Kingdom towns of Waterford, Concord and Barnet prompted the state appropriation and state approach to setting the dams' values.
Those three towns together host the largest dams that are on the upper reaches of the Connecticut, the Comerford, Moore and McIndoes dams. But they lack the staff and financial wherewithal to debate assessments with TransCanada, she said. Waterford and Concord have found themselves in a value debate with TransCanada, with Waterford on the losing end, and neither town entirely happy with the result.
"After 10 years, as volatile as the real estate market has been, this needed to be done," said Kitchel, who noted that both the towns and the state stood to benefit from up-to-date appraisals.
"The whole issue of property taxes and equity was a big concern," at the meeting in Waterford last winter, she said.
Proposals from appraisal firms with the necessary expertise to evaluate the dams on the Connecticut and Deerfield rivers are due Tuesday, according to Bill Johnson, head of the Department of Taxes' Division of Property Valuation and Review.
Johnson said that he had preliminary talks with interested firms, but he said he didn't know how many would be bidding on the $200,000 contract.
The last appraisal in 2000 put the value of the dams at $239 million, Johnson said.
Johnson said it had been 10 years since the state has done an appraisal on the dams, which were sold to TransCanada in 2005 by the then-bankrupt USGen New England for $505 million, a price which reflects both the Vermont and New Hampshire portions of the dam, as well as the Deerfield River system.
In all, TransCanada Hydro Northeast owns six dams on the Connecticut, two dams on the Deerfield River in Vermont at Searsburg and Whitingham, and six smaller dams on the Deerfield, but in Massachusetts.
At one point during bankruptcy proceedings, the state of Vermont submitted a bid for the dams, but dropped out in the final round.
Cleve Kapala, TransCanada Hydro Northeast's director of government affairs, said that TransCanada would cooperate with the reappraisal, but he raised questions about its fairness.
Kapala, who worked for the two previous owners of the dam network, New England Power Co. and USGen New England, said that no other power generating facility was being singled out for a state-funded appraisal.
"It feels kind of odd that only one company would be singled out," he said.
"We employ union and nonunion people. We run clean and safe and compliance plants. It's odd that it's aimed just at us," he said.
After the bill passed, Kapala said he called Kitchel to register his concerns.
"It was in the budget bill, but it sort of slid by," he said, noting he was never called to testify about the issue.
"When the state bid on the assets, their bid was very low, and now they want to tax at a very high rate," he said.
When the state was interested in buying the dams in 2005, it bid less than TransCanada's $505 million, and then declined to top it. It is believed that the state's bid was close to $400 million, but the figure has never been released publicly.
The timing of the new reappraisal could end up backfiring since the price of electricity has plummeted in the past year, and the value of any generating facility is tied in part to the value of the energy it produces.
According to Kapala, a year ago TransCanada was selling power for about 10 cents per kilowatt hour; now the price ranges between 3 and 3 1/2 cents, a 68 percent drop.
Those prices represent the "real time" wholesale prices on the spot market, said Marcia Blomberg, a spokesman for ISO-New England, which manages the New England power system.
Blomberg said in July 2008, the wholesale spot market was 11 cents per kilowatt hour, while in July 2009, the same market saw power at 3 cents.
The sharp decline in the costs of natural gas, along with the decline for power itself, is behind the steep drop, she said.
In New England, 31 percent of all power comes from natural gas, while hydro power represents 8 percent of all power needs.
Power generating stations' value are calculated on several basics, he said: the value of the power, and its mechanical, electrical, and physical assets.
The drop in energy sales hasn't discouraged at least two southeastern Vermont towns, Rockingham and Vernon, from putting TransCanada on notice that each town was or would be increasing its appraised value.
The town of Vernon recently more than doubled the value of the Vernon dam, which had recently undergone an extensive 18 months of renovations, said Carol Hammond, one of Vernon's three listers.
Vernon, unlike some Vermont towns, hired its own expert to evaluate the Vernon dam, which went from $12 million to $25 million in value, according to the appraisal done by George Sancoucy, PE, LLC., a Lancaster, N.H. firm.
For comparison sakes, Vermont Yankee nuclear plant is assessed at $280 million, Hammond said.
Not surprisingly, TransCanada has fought the new higher appraisal, first to the listers, where it was turned down, and then to the Vernon Board of Civil Authority, which is made up of the Select Board, the town clerk and the elected justices of the peace. The BCA also rejected TransCanada's arguments and Hammond said TransCanada is now taking it to the next level of appeal, either to the Windham Superior Court or the state appeals board.
Hammond said she welcomed the state-funded appraisal.
Likewise, Rockingham, home to the Bellows Falls dam, has put TransCanada on notice that it will be using the $126 million figure set during its 2005 townwide reappraisal. For the past four years, the town has used a $90 million figure, after negotiations with TransCanada averted a full blown court fight, which the town had engaged in with USGen – and won.
Rockingham, of all the Connecticut River towns, reaps the biggest tax payoff – more than $3 million a year in taxes. Rockingham is unique among all the Vermont towns in that the generating facilities – the turbines, generators and other high-value equipment – are on Vermont soil. In the case of every other dam, the high-value equipment is in New Hampshire, which already owns the 90 percent of the actual dam, since the st
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