New hydro valuations could boost tax rates
MIDDLEBURY — Members of the Vermont House Ways and Means Committee on Wednesday were considering steps to pre-empt a major devaluation in utilities’ hydro-power facilities statewide, something that would result in new assessments that could substantially reduce grand lists — and therefore boost property tax rates — in six Addison County towns.
For the purpose of levying property taxes, hydro facilities are currently reassessed annually based on an income analysis that takes into account the wholesale cost of power.
Trouble is, the wholesale cost of power dropped from $80 per megawatt hour to a little more than $40 per megawatt hour in one year, according to David Sharpe, D-Bristol, a member House Ways and Means.
“As a commodity, it tends to rise and fall with the price of natural gas,” Sharpe said.
But that recent, precipitous drop in power costs figures to correspondingly reduce the value of hydro infrastructure in Vermont towns, including five communities in Addison County.
Information provided by the town of Middlebury shows that because the assessed value of hydro-power plants has dropped, the grand lists in the county towns where those plants are located will fall in the range of $6.5 million in Weybridge to $82,240 in Leicester.
New Haven would see its grand list shrink by $4.6 million, Middlebury by $2.1 million, Salisbury by $1.8 million, and Vergennes by $1.37 million.
The 2009 grand list for New Haven is $845 million, meaning the lower hydro valuation would lower the grant list by about a half percent.
The loss for Middlebury would be about one-third of a cent on the tax rate.
In Vergennes, the loss in grand list would bump the municipal tax rate by around one cent, according to City Manager Mel Hawley. Hawley recently testified on the issue before House Ways and Means, arguing that Vermont communities cannot afford to take a major financial hit. He also lobbied for a less volatile way of assessing hydro properties.
“They should be using five or 10 years of revenue information” instead of just one, Hawley said.
Steve Costello, spokesman for Central Vermont Public Service Corp., said the state’s largest utility is also interested in a new approach to calculating how hydro facilities are assessed.
“We believe a smoothing mechanism would be helpful,” he said, whether that be computing values based over a five-year average of revenues, or some other time period.
But Costello noted that when hydro property valuations are higher, it means higher taxes for utilities and greater revenues for host towns.
“By smoothing out the low spots, you are also smoothing out the high points,” he said of tax revenues. “The days of unexpected windfalls will be over.”
Sharpe said he is confident Ways and Means will propose freezing hydro property valuations at 2009 levels, while advocating for hydro infrastructure to be assessed based on a five-year rolling average “to give consumers, utilities and communities a consistent grand list piece.”
Since it is too late in the session to propose this change through a new bill, Sharpe said he expects the Ways and Means recommendations will be introduced through other legislation — such as the miscellaneous tax bill — that is pending before conference committee.
Reporter John Flowers is at email@example.com.