July 25, 2008

School District Questions Whether KCP&L is Paying Enough Taxes on Power Plant Work

By Steve Everly, The Kansas City Star, Mo.

Jul. 25--A Platte County school district is questioning whether Kansas City Power & Light is paying its fair share of taxes on construction of its coal-fired power plant near Weston.

Increasingly frustrated West Platte R-2 School District officials say their views on the matter have been dismissed by Platte County and KCP&L officials -- not only on tax owed on Iatan 2, the $1.9 billion power plant being built, but also on upgrades to the existing adjacent Iatan 1 power plant.

The dispute involves the 50 percent assessment granted by Platte County, which district officials say is too low, and questions about whether the soaring costs of the plant and environmental upgrades are being accurately reflected in the property taxes owed on the projects.

As things now stand, the district will receive about $20 million from taxes on the projects, which will be paid while they are under construction. Under Missouri law, once the plant is operational, the state moves in and distributes tax proceeds across the state, which means West Platte will receive only a small fraction of the tax revenue it receives during construction.

The district says it is grateful for the $20 million, but is potentially leaving millions of dollars on the table at a time when it is facing looming financial difficulties.

Enrollment is expected to decline sharply over the next few years, and no other taxable projects that would generate substantial additional revenue have been announced for Platte County.

District superintendent Kyle Stephenson says receiving the appropriate amount of tax revenue from KCP&L is crucial -- calling the projects the 900-pound gorilla for the district's future.

"I don't mean to sound unappreciative, but we want what is fair and equitable and what would be fair to the kids," he said.

KCP&L and Platte County's assessor say the district is already getting a fair amount.

Matt Tidwell, a spokesman for the utility, said the 50 percent assessment was the level that Platte County said was customary for such projects. Once a year, as required, the utility is reporting what is spent on the projects, which is then used to calculate the taxes owed.

Lisa Pope, the assessor, said other utility projects in the state also had received the 50 percent assessment and the utility was also paying taxes on "soft" costs such as engineering fees, which it is not necessarily required to do.

"I feel very comfortable with what we are doing," she said. "I think they've been very fair with us."

But West Platte officials say they have been largely ignored. Bill Taylor, the Board of Education president, said they weren't even consulted about the 50 percent assessment.

The district's relationship with KCP&L worsened after a meeting with the utility last year, a day after the district was told that the projects would receive the 50 percent assessment. KCP&L also rejected the district's request for some cost information about the plants, deeming the information confidential.

Gary Myers, an attorney for the district and former general counsel for St. Joseph Light & Power, said he approached KCP&L's legal counsel seeking another meeting in hopes of trying to improve the relationship between the district and utility.

He said he was told the district was creating too much work for the utility, and any future meetings would be strictly between attorneys.

"We were shown the door," Myers said.

That is how things have largely remained. District officials say they think they still have a sound argument that the 50 percent assessment is unfair.

Marilyn Baumhoer, a manager at the Missouri State Tax Commission, said other utility projects in the state have received 50 percent assessments. But there is no requirement that they be set at that level.

Myers said he was told by KCP&L officials last year that they needed the reduced assessment, in part, because of the risk they were taking in completing the projects. But he said the risk for the project was less than for other projects that have been granted the 50 percent assessment in the past.

KCP&L, before construction started, won from the Missouri Public Service Commission a groundbreaking agreement that the money spent on the plant would not damage the company's debt rating.

The district is also still trying to determine if the plant's soaring cost is showing up in the taxes it is paying. It recently got some information it requested, but it still didn't answer the question of whether an appropriate amount of tax was being paid.

Pope, the assessor, says Missouri is an "honor state" on property taxes and relies on taxpayers to report accurate information.

But KCP&L has also provided audits of its expenses. Also, the assessor's office visits the plant's site once a year to take photos and check things with the utility.

That is not sufficient for West Platte, which says the questions remain.

"We can't fight with them. We don't have the resources to do it," said Stephenson, the superintendent.

To reach Steve Everly, call 816-234-4455 or send e-mail to [email protected]


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