Overnight, more than 10 percent of Mount Pleasant ISD’s budget, about $4.2 million in tax revenue, simply disappeared. In the last year, Luminant has filed lawsuits contesting appraisals of its coal-fired plants in the four other rural counties where it owns coal plants (Rusk, Freestone, Milam and Robertson), mostly in East Texas, forcing schools, community colleges, hospitals and local governments into financial straits. It also sued in Somervell County, where it operates the Comanche Peak nuclear plant. So far, only the Comanche Peak dispute has gone to trial. In March, a state district judge ruled against the company and upheld the appraisal district’s valuation of the nuclear plant. The company filed an appeal June 1.
Marshall is left with few options. Mount Pleasant ISD’s tax rate is already at the legal limit. In late August, at Marshall’s urging, the school board eliminated a local homestead exemption, raising homeowners’ tax bill collectively by $800,000. It was not a popular move in this conservative and poor county.
Eliminating the exemption only cut the deficit by about one-fifth. The board and Marshall came up with the remainder by freezing wages, raising insurance premiums for all employees, delaying maintenance and dipping into savings. Now, district administrators are at work preparing next year’s budget, and they are assuming Luminant will contest the 2016 appraisal, too, and file yet another lawsuit.
If Luminant loses, it will have to pay the unpaid taxes as well as penalty and interest. If Luminant prevails, the state will eventually replace the lost tax revenue. Essentially, other taxpayers around the state would have to cover the costs through the school finance system.
To no surprise, the Texas Observer piece on Luminant’s 2015 property tax litigation is an incomplete description of the company’s effort to reach fair taxable values at our plants that are much lower because of sustained low wholesale power prices.
Our goal is paying our fair share and without the court challenges, those valuations would result in the company paying excess property taxes for 2015. To suggest any other motive, as this article does, is inaccurate and cynical.
Although we provided the Texas Observer with extensive responses and data explaining how market forces drastically reduced plants revenue, income and property values and why power plants are valued differently from homes, those points were excluded leaving the reader with insufficient context.
Historically low natural gas prices and, increasingly, subsidized wind generation, especially since 2014, have driven power prices sharply lower with forecasts for them to remain low for years.
The Texas Observer implies homes and power plants for property tax purposes are valued the same through comparable sales. They’re not, despite material we gave to the reporter explaining the distinction. Unlike the residential market, there are very few sales of power plants that can provide a good comparable value.
The best, most accurate and sensible way to determine the fair taxable value of a power plant is by using what’s called a market-based income model. Market-based income models are widely relied on in Texas by owners of large industrial properties that are income-producing assets.
Counter to what the Texas Observer reported, we have shared with county appraisers for the past several years that many of our units have lost significant amounts of income – well into the tens of millions of dollars for 2015 alone. And our annual filings with the Securities and Exchange Commission have shown a steadily decreasing value for these same plants.
Just as plant values were higher when power prices, revenue and income were greater, values must now accurately reflect the impact of low prices. What remains constant is that as a longtime member of the communities where our plants, mines and many employees call home, we remain deeply concerned about their overall success.