Assessment figure lowered sharply for Rockland Township power plant
By JUDITH O. ETZEL

7/31/03

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Venango commissioners OK a deal that places the assessed value of the facility at $4 million.

A legal appeal aimed at upending a $28 million assessment figure for the Handsome Lake power generating plant in Rockland Township has been settled out of court.

The final count: one seventh of the original assessment figure.

On Wednesday, the Venango County commissioners approved a deal that pegs the assessed value of the 2-year-old electric generation plant at $4 million.

At that level, the amount of property taxes the plant generates for Cranberry Area School District, Rockland Township and Venango County is dramatically reduced. In the case of the largest taxing body, the school district, the annual tax revenue will drop from an anticipated $348,278 to less than $50,000.

"The county has determined that it is an unwarranted waste of taxpayer resources to continue the case through a trial given the settlement proposal under consideration," county solicitor George Thompson said in a prepared statement.

At the heart of the settlement is information produced in an appraisal prepared for the county by Coyle Lynch and Associates of Sharon Hill, Pa. The firm's senior appraiser has a national reputation for appraising power plants, Thompson said.

Upon inspection of the Handsome Lake property, the county-hired appraisal company determined "the overwhelming majority of the improvements were machinery and equipment," Thompson said. Those items are excluded from taxation under the Pennsylvania assessment laws and according to various Pennsylvania court decisions.

The exclusion of machinery and equipment dropped the assessed value of the power plant to about $4 million, a steep fall from the $28 million figure set in May 2002 by the three-member Venango County Board of Assessment Appeals.

And it is the same argument used by Handsome Lake, part of Constellation Power of Baltimore, Md., when the company appealed the $28 million figure shortly after the appeals board upheld the original assessment in May 2002.

The county Board of Assessment Appeals decided the $28,086,970 assessment figure was appropriate for the gas-fired generating plant. The figure included $1,487,000 for the 50.5 acres of land and $26,599,970 for the buildings, assessments that board members Arch Newton, Maurice Stiglitz and Barbara McGarvey found appropriate.

Handsome Lake, however, contended the $28 million figure was "arbitrary and capricious" and warranted further examination by the court. The actual cost to build and equip the Rockland plant was $103 million.

The actual value for tax purposes, argued the power plant's legal counsel of Kirkpatrick and Lockhart of Pittsburgh, should not include equipment and furnishings.

The bulk of the cost, or $70 million, was for Pratt & Whitney power generating engines and labor costs to install the machinery. What should be property taxed, argued Handsome Lake, were land costs, site preparation, buildings to house machinery, enclosures and minor miscellaneous costs.

Based on that formula, the actual assessed value of the property should be between $8.5 and $10.5 million, the power plant officials said.

The settlement of $4 million dipped significantly below the company's own assertion of its Handsome Lake plant value.

That low appraisal, plus Handsome Lake's willingness to forgo interest on monies it already paid in taxes for 2003 and 2002, an amount Thompson said is "substantial," made consideration of the settlement offer "prudent."

The power plant's tax payments on a tentative assessment figure of $8.5 million have been held in escrow pending a settlement or, had the agreement not been reached, the outcome of a Venango County court hearing originally scheduled earlier this week.

Under the settlement, the school district, township and county will refund 25 percent of the payment of real estate taxes made by Handsome Lake for 2002 and 2003. The remaining amount of overpayment to each taxing authority will be used to reduce the future amount of taxes Handsome Lake owes until the refund balance becomes zero.

Generally, the new $4 million assessment figure for the power plant will yield annual tax revenues of $49,754 for the school district, $20,544 for the county and $4,145 for the township. Those figures are one-seventh of what they had been calculated for on a $28 million assessment.

Rockland Township supervisors and the Cranberry school board are expected to approve the settlement at meetings in the next several days.

The lower assessment figure is in keeping with a statewide trend in which major utility companies in Pennsylvania are paying much less in property taxes now than they did five years ago.

The deregulation of electric companies started the trend by allowing the firms to contribute less to a state property tax fund. By 2000, plants no longer had to earmark money for the state fund but instead began being taxed directly by the municipalities in which they were located. That led to sharper, more intense and generally more successful efforts to have tax assessments lowered.