Claremont, N.H., Wins Tax Abatement Suit Filed By Waste Group

By Kyle Jarvis, Eagle Times, Claremont, N.H.

Mar. 18–CLAREMONT — A Merrimack Superior Court judge has ruled in the city’s favor in the property tax abatement suit filed by the former New Hampshire-Vermont Solid Waste Project.

The decision saves the city an estimated $1 million in potential refunds to the 29-town project for taxes paid in 2004 and 2005 and could set a precedent for future assessments.

“It couldn’t be any better,” City Manger Guy Santagate said Monday, referring to the 18-page decision. “We won on every point. Now, instead of trying to figure out how we’re going to come up with $750,000 to $1 million, now we’re moving forward with a precedent for an even higher valuation.”

The March 11 ruling by Judge George Manias not only rejected the project’s claim that the Wheelabrator incinerator and surrounding property on Grissom Lane had a fair market value of $5.6 million, he said the assessed value exceeded the city’s figure by about $2 million.

“The fair market value of the property after deducting the exempt property (pollution control equipment) was therefore $18,145,845,” Manias wrote in his conclusion. “Applying the 82.8 percent equalization ratio to the number yields an assessed value of at least $15,024,759, which is more than the city’s assessment of $13,124,200.”

Manias went on to state that “the plaintiffs are not entitled to an abatement, and recommends their petition be dismissed.”

The project, under its waste disposal agreement with Wheelabrator, paid the taxes on the Grissom Lane property through 2007, when the project disbanded.

The waste-to-energy incinerator went online in 1987 and Wheelabrator sold the electricity to Connecticut Valley Electric and then to Public Service of New Hampshire when PSNH bought CVEC several years ago. It was the relevance of that power purchase agreement in establishing fair market value that the case hinged on.

Attorneys for the project argued that Wheelabrator should be “appraised without consideration taken for the effects of the 20-year power purchase agreement which provides for guaranteed, above market rates for the sale of electricity through 2007,” the ruling states. The city disagreed, rejecting the case history presented by the plaintiffs of Demoulas vs. the Town of Salem, N.H., and Royal Garden Co. vs. the City of Concord. The former was a shopping center and the latter a privately owned housing complex. Both sued for abatements.

“The referee (judge) agrees with the city,” wrote Manias. “And finds unconvincing the plaintiff’s attempt to analogize a power plant operating under a power purchase agreement to a shopping center saddled with unfavorable long-term leases (Demoulas) or a privately owned housing complex (Royal Gardens).

“The Wheelabrator plant is regulated property for purposes of determining its market value,” he said.

“The waste-to-energy plant cannot be fairly appraised without reference to the long term PPA (power purchase agreement) which was integral to the decision to build it.”

The project had been paying taxes based on the city’s assessment for most of the 20-year contract with Wheelabrator, without challenging it. But after the state Department of Revenue Administration appraised the property at $2.7 million under a new law allowing the state to collect its portion of property taxes for education directly, the project had its own appraisal done, which came in at $4.7 million. It then filed an abatement for taxes paid in 2004 and 2005. The city denied the abatement and the project went to court.

Manias’ ruling pointed to the fact that “both (testifying) experts agreed that Wheelabrator plant owes its very existence to the regulatory framework which requires electric franchise utilities to buy electricity from qualifying small energy producers at predetermined rates under long-term contracts such as the one at issue here.”

Another aspect of the case not helping the plaintiffs was Wheelabrator’s bookkeeping.

According to the judge’s decision, “the net book value of the facility in 2004, calculated by Wheelabrator’s independent outside accounting firm and accepted by its owners, was $17,567,000. If either of (Stephen) Traub’s (expert assessment witness for the project) fair market value appraisals of $9,813,512 (market), or $14,978,112 (contract) was accurate, standard accounting procedures would dictate that Wheelabrator disclose the facility as an impaired asset,” something it didn’t do.

On Monday, the city’s attorney for the case, Jim Basset, of Orr and Reno in Concord, called the decision “a complete victory,” and “quite extraordinary and unique” regarding its “clear, unequivocal” nature.

“I wish all my cases were like this,” he said. “They aren’t. But it was certainly worth the wait and we’re glad the judge took the time he did in examining the facts of the case. Obviously it was a significant amount of money in question.”

Basset said the project would have a tall task ahead of it if it decides to appeal the decision.

“They would basically have to prove to a Supreme Court judge that a Superior Court judge misvalued the facility by several millions,” he said. “Plus it’s more difficult for them because there are so many towns involved.”

Santagate said the decision “justifies not only our position, but our decision not to settle. Some people think there’s too much litigation going on in the city right now, but I disagree. We only go to bat on the issues we think are most important. We will stand up for the taxpayers.”

Santagate also thanked city attorney Jane Taylor for her efforts in the case, as well as those who provided expert testimony on the city’s behalf.

Project director Mike Durfor did not immediately return a voice mail left at his home Monday afternoon.

The ruling will have no impact on the taxes paid on the incinerator until at least 2012 because in a related eminent domain case, the city and Wheelabrator reached an agreement last September that will have Wheelabrator paying $375,000 a year in property taxes for five years.

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