Posted on August 18, 2017
If, for the purpose of determining your property tax, you could self-report the value of your own property- the house where you live and the land you own, or one or more businesses-would you trust yourself to pay your fair share of property taxes? Would the honor system work? Would people in their right mind even consider, much less allow such a system?
That is the system public service entities use Statewide: They determine the amount of their own property taxes. It's perfectly legal. In June 1986, when Entergy-River Bend built its facility in West Feliciana, Parish officials granted a 10-year waiver of property tax payments. As expected, Entergy has brought jobs and economic growth to the region. For the 20 years since the waiver ended, however, like other similar public service entities, Entergy has self-determined and self-reported its valuation, and the Louisiana Tax Commission has not made supporting data available for public examination.
Losses Due to Self-Assessment
The June 2017 Legislative Auditor's Performance Audit of the Louisiana Tax Commission estimates that over the past year alone, West Feliciana has lost more than $10 million in tax collections because of improper procedures used by the Tax Commission when it assesses public service property, with $5 .5 million of that amount owed by Entergy on the River Bend Nuclear Plant.
Parish President Kevin Couhig emphasizes that Entergy is a good Parish partner, that all of West Feliciana benefits from Entergy's presence, and that he was in favor of Entergy's paying no property taxes at all its first 10 years in St. Francisville.
Yes, Entergy contributes in many ways, recently donating $5,000 and $10,000 checks for cultural, historical and educational projects-and the volunteers who staff the projects, the volunteers for whom St. Francisville is known, are grateful.
What could the Parish do, however, with that "if only" money? If only, for example, the State required assessments -and therefore tax payments-based on the replacement cost of the facility? The Entergy facility in St. Francisville cost nearly $5 billion to construct in 1986, yet today's tax assessment is only $180 million, based on 25 percent of the self reported $720 million value.
In his letter of July 24, 2017, to Governor John Bel Edwards, Couhig notes how Entergy's self reporting has affected his Parish:
"The $5 .5 million-dollar annual shortfall in taxes paid, identified in the Legislative Auditor's report, represents "$1,159 (less) per student in our public-school system, $700,000 less for our Sheriff's office, $250,000 less to fight fires, and about $1,000,000 (less) to provide Parish services and maintain roads. As important, the LTC's improper assessments shift that tax burden to individuals and small businesses in our Parish that cannot afford lobbyists and massive campaign contributions."
Larger Effect on West Fel's People
West Feliciana Parish Assessor Randy Ritchie explains that "the Parish government calculates its budget, and the parish assessor calculates the value of the residential and commercial Parish property subject to taxation. The Louisiana Tax Commission calculates the value of public service properties.
"In West Feliciana, because Entergy pays around $5 .5 million less than it should, everyone else pays more to make up the loss." Further, because of the State Tax Commission's inappropriate valuation methodology, which tended to undervalue public service property, the Parish experiences a loss, beyond the Entergy dollars, of another $4.6 million.
Or what if the State used the business unit approach to assess value? Couhig notes that he has over 30 years of experience in business unit evaluations, that is, in analyzing companies in which persons have invested or are considering for investments, in "looking at income and cash flow on an annual basis."
Entergy has enjoyed a stable revenue flow, he says. Entergy's customers have not experienced lower bills. Every year, however, "for many years in a row," the assessment of Entergy's plant in West Feliciana has fallen "by the same exact dollar amount, no matter how much new equipment is added .... " Further, the company has used depreciation to figure its property tax amount, though the depreciation argument "is invalid since depreciation is not a component of the valuation process required by law."
In defiance of reason, Entergy's financial outcomes grow steadily· year after year, while its valuation steadily declines. Couhig, in his letter to the Governor, writes, "I can state without fear of contradiction that this simply isn't possible if an honest and correct valuation is made each year. Something stinks .... ''
The Legislative Auditor's report puts the onus on the Tax Commission, noting that it "has not developed rules and regulations defining how to appraise public service companies" and that it even "values different companies within the same industry inconsistently without any documented explanation."
Most astounding-almost beyond belief-is that the LTC not only "calculates the value of public service companies using self-reported information", but also "does not conduct any audits to ensure the accuracy of the information companies submit." The unbelievable postscript is that the LTC does not share its· data with parish assessors, who are required by law to certify property tax amounts as correct.
Couhig, who says he supports the Governor, recalls that just prior to Mr. Edwards' election, the candidate assured him that he would "appoint commissioners who would straighten this out and do the right thing.
"I believe he is an honorable man," Couhig says of the Governor, ."and I believe he has more frogs jumping out of the pond than he can net. But I've been working on achieving fairness in Entergy' s property tax assessment for three years. I am asking the Governor to demand fairness and to demand the sharing and validation of data."
Couhig would like to replace the yearly one-page report that arrives at the Parish Assessor's office, a sheet of paper that includes only the amount assessed to Entergy and not how company officials arrived at it or on what basis the Tax Commission approved it.
West Feliciana is not the only parish that suffers financial loss due to the self-reporting of public services valuation. The Legislative Auditor found that the "procedures LTC uses ... effectively decrease the assessed value of the companies that own these plants by $50 .5 million in St. Charles Parish...."
Some years ago, Couhig says, "St. Charles sued the Tax Commission, and West Feliciana 's assessor joined in. After the suit was filed, the Tax Commission changed its rules to allow it to refuse to share data and information." So everybody keeps playing by the existing rules or twisted rules -or lack of rules.
West Feliciana Parish Assessor Ritchie says, "According to the Legislative Auditor's report of June 7, 2017, this problem is State-wide, not just a West Feliciana problem. Even East Baton Rouge is getting shorted." The Legislative Auditor's report estimates that State-wide losses from the Tax Commission's errors total more than $250 million per year.
Another West Feliciana Connection
The LTC can boast yet another West Feliciana connection. The investigative unit of WBRZ, Channel 2, reported, on July 8, 2015, regarding The Bluffs, "allegations of a backdoor attempt by the State Tax Commission to reduce the golf course's tax assessment by nearly a quarter of a million dollars." The tax on that amount would be $60,000, or 25 percent. At the time, the golf course owed "nearly $60,000 in back taxes on the property." The Tax Commission, according to the Channel 2 report, claimed that a clerical error caused the use of an incorrect form.
Mr. Edwards: Take Action
Laying blame, Couhig says, is not his purpose. That's not the point of his work. The point is to establish rules, consistent rules, for assessing all public entities and to create a process whereby those affected by assessments may appeal. The housecleaning, the fumigating, must start at the top, he says, with the Tax Commission
Couhig declined to discuss Charles Abels, the chief assessor of the Tax Commission, the top assessor for the entire State, a person who was once a parish assessor but who could not qualify for that position today. The -Parish president says that his focus is Governor Edwards' response to his letter reminding him of his promise and requesting fairness for West Feliciana.
An examination of Livingston Parish News reports, however, indicates that today's chief assessor of the LTC, due to a felony plea bargain that required him to resign from office and never again serve as a parish assessor, may not be the most qualified for service as the State’s top assessor, that is, as the assessor overseeing Louisiana's 64 parishes, 58 of which contain Entergy assets.
Even Larger Effect
Ritchie refers again to this year's Legislative Auditor's report, Schedule D, which "lists State-wide losses due to undervalued public service properties for the Years 2011 through 2015. In 2015, that loss was $2.5 billion in tax dollars, due to the State Tax Commission's inaccurate evaluations of the businesses that the LTC assesses-utilities (such as Entergy), oil and gas pipelines, landline telephone companies and railroads. "On the parish level, we have to value businesses and residences on their market value, and the LTC should be doing the same thing. Instead, according to the Nakomoto piece on Channel 2, Entergy officials said they had to take into account the effect on the ratepayer, that is, the effect on themselves. In the law, there's nothing to stop them”
In his letter to the Governor, Mr.Couhig refers to an Advocate story that quoted Entergy Spokesman Michael Burns as saying: " The tax policy reason behind this legislative enactment of this type of appraisal system is to strike an equitable balance between the revenue needs of local government and the tax expense ultimately borne by Louisiana utility customers." Couhig's response is that .. the Louisiana Tax Commission has no legal authority whatsoever to balance the revenue needs versus the tax expense. The purpose of the LTC assessment is to correctly assess the value of public service properties and, under Louisiana law and the LTC's own rules, to allocate those values in accordance with the value of the assets IN TIIE PARISH IN WHICH THEY RESIDE."
No Appeal Process Re Public Service Companies
Ritchie explains, “The purpose of House Bill 473, which Kenny Havard introduced in May of 2015, was to give others, such as parish assessors, the ability to check public services assessments." The bill was killed in committee, with Entergy a major player in that lobbying process.
The appeal process for all other taxpayers, Ritchie says, is, first, the Board of Review and then the LTC. But public service properties that are valued by the Tax Commission are appealed directly to the Tax Commission.
“Because the LTC sets the public service company valuations so low, there is no appeal process for public service companies. If the value is under-reported, why would anyone appeal it? If those companies did appeal, they would go to the very agency, the LTC, that set the low value. So the public service companies won't appeal their assessment... and no appeal process exists for the Parish assessors or even the Parish agencies-the Sheriff's office, the School Board-whose budgets are affected by the low valuation.
"In other words, in the real world-mother, father, grandfather, son-all who own property-have to pay their fair share.
"Meantime, utilities, which are already getting a break, negotiate for an even lower price. They keep knocking it down and knocking it down. No one does that for the homeowner and the regular businessman.
"The Legislative Auditor should have the authority to require that these utilities be reevaluated … if he doesn't have that authority, then, apparently, there's no check ... unless there's a Statewide entity such as the Attorney General that can look into the matter, now that the State Auditor has reported that the process is incorrect.
"Mr. Nakamoto has reported: 'Governor Edwards expects that the Louisiana Tax. Commission will review the Legislative Auditor's report and make any appropriate changes.' The Tax Commission," Mr. Ritchie continues, "should have done the right thing a long time ago. It should have made those 'changes' a long time ago."
Publisher's Note: Entergy responded August 1 with the same statement that a June 28, 2017, article in The Advocate quotes. This Feliciana Explorer article quotes that statement. The Governor 's office responded August 2 with the same statement it gave Channel 2’s Chris Nakamoto; this article quotes that statement.See More News