The largest tax assessment battle Zeeland has ever faced — and the largest brought this year before the Michigan Tax Tribunal by Consumers Energy — moved forward in July with the city filing its response.
The Zeeland Generating Station, a gas-fired facility on a 30-acre site in Zeeland that is capable of producing up to 930 megawatts, is Zeeland’s largest single taxpayer and would have to pay a 2014 property tax bill of $7,257,902, according to City Manager Tim Klunder.
However, if Consumers wins its appeal now before the Michigan Tax Tribunal, its bill would be cut to $3,135,502. The $4 million in lost revenue would have gone to the city, the school system, the county and other local taxing entities. Klunder said the amount lost by the city of Zeeland alone would be $1,018,000.
Consumers says the 2014 assessment is not correct and should be cut from $260.4 million to $112.5 million.
Zeeland City Attorney James A. Donkersloot said it is “certainly the largest tax appeal that’s ever been filed against the city of Zeeland. We think that Consumers is in error of their analysis.”
“Consumers received half-taxes for years and they never complained” about their assessment, said Donkersloot.
According to the formal response by Zeeland filed with the MTT in early July, “The assessment was verified in substance in (Consumers’) Amended Act 198 Contract with the City.”
PA Act 198 allows local taxing units to give temporary tax abatements to businesses in return for investing in the community. The response says the Amended Act 198 contract between Zeeland and Consumers stipulates a range of values and abated taxes “and Petitioner waived its right to appeal the values or the abatement.”
Klunder said the assessment in 2013 on the Zeeland Generating Station was almost $259 million.
“The taxable value did not have a significant increase (in 2014),” said Klunder.
Donkersloot noted some of the benefits of the PA 198 are expiring.
Consumers has owned the plant since 2007, and the PA 198 has been in effect since that time. When asked what prompted the appeal now, Consumers spokesperson Roger Morgenstern said, “Since we purchased the plant in 2007, market conditions have changed rather significantly.”
He explained that “the energy market here in the Upper Midwest has changed; demand has decreased. Even though we’re climbing out of the recession, demand is still down from where it was before 2007, and there is more renewable energy out in the market.”
He noted Michigan’s 2008 energy law encourages the development of “green” energy by requiring 10 percent of the state’s electricity to come from renewable sources by 2015.
“We’re at about 8 percent. We’re very close,” said Morgenstern.
Consumers is maintaining that the additional “green” sources of electricity and the drop in demand in the market have reduced the value of the Zeeland facility.
“We have been working with the city,” he said. “We just respectfully disagree with their valuation compared to what we believe it is.”
Consumers is in the process of buying a gas-generating plant in Jackson, according to Morgenstern, which allows it to draw a comparison with the Zeeland plant.
“That plant (in Jackson) is a little bit less than half the output of the Zeeland plant, but the price that we’re paying is quite a bit less than half of the value that the city of Zeeland has placed on the Zeeland plant,” said Morgenstern.
“So we are seeing what the market forces are in play, both in the energy market and also what the going rate is for gas-generating plants now in this market,” he said.
“For the sake of our customers, we need to value the plant so that it’s an accurate reflection of today’s market,” said Morgenstern.
By that, he means all the costs of owning and operating a power plant — including the local property tax bills — go into the formula used by the Michigan Public Service Commission in approving customer rates proposed by the utilities.
The appeal is expected to take months to be resolved; a final determination by the MTT is not expected until 2015 or possibly 2016.