Cut in Fermi tax value trims revenues $3.3M

3/21/2001

MONROE - Under a deal brokered last week between Frenchtown Township and Detroit Edison officials, the value of the Fermi II nuclear was cut $72 million, leaving tax coffers across the county to make up about $3.3 million in lost revenue next year.

But a spokesman for Detroit Edison said this year's relatively small devaluation is probably the first of several to come. That should serve as a warning to government officials from South Rockwood to Ottawa Lake that the county's electric gravy train may be about to derail.

“We always take a look at our assessments every year, like every property owner, and talk with the taxing units,” Detroit Edison spokesman Guy Cerullo said. “We'll be looking closely at the Fermi II assessment next year and probably the year after that.”

Mr. Cerullo said the 1,139-megawatt Fermi II plant accounts for about 12 to 15 percent of the utility's generation capacity. Even though it was built beginning in 1979 and began generating electricity in 1988, “it's still a valuable part of the generating assets of the company, in terms of the power we get.”

The value of the plant in 1999 was calculated at $733,077,200. In 2000 that figure dropped to $721,267,300, township records show. Much of that $12 million loss was attributed to depreciation.

For 2001 the figure was set at $649,209,200. The 45.4 mills of property tax assessed on that figure will be collected next year.

Frenchtown Township supervisor Jim Spas gave credit to the utility for moving slowly in its efforts to lower the plant's property tax liability, thereby allowing local governments to make up any revenue losses in other ways.

“They've got a grave concern” that the plant is overvalued, Mr. Spas said. Elected officials have known about that concern for many years and should be prepared, the Frenchtown Township supervisor said.

“I know the handwriting is on the wall. The handwriting was on the wall years ago,” Mr. Spas said.

Tax losses from the devaluation will be spread over a number of different taxing agencies, based on the varying amounts of millage they levy against the plant. They range from a loss of $17,150 in revenue to Lake Erie Transit's bus operation in Frenchtown Township to more than $1.3 million less that Jefferson Schools will receive. Those losses will be felt next year, when the taxes on this year's assessment are collected.

In total, the $72 million devaluation will save Detroit Edison nearly $3.3 million in property taxes, county records show.

Some of those losses will be made up by growth in other areas, including Frenchtown Township. Mr. Spas said the taxable value in his jurisdiction, despite the $72 million loss from Edison, will drop just $12 million.

More than one-third of the county's $4.7 billion in taxable value rests with just 10 firms. And the largest, Detroit Edison, owns more than 27 per cent of all the taxable value in the county in its two power plants, the coal-burning generating plant in Monroe and the Fermi II Nuclear Power Plant in Frenchtown Township, as well as its power distribution system.

While the taxable value of Fermi II continues to decline, there is little chance the same will happen to the utility's Monroe coal plant. Nationally, the value of coal-fired electric plants has risen sharply, County equalization director Beth Ann Choate said.

Mrs. Choate warned county commissioners several years ago of a trend among utilities nationally to successfully challenge the assessed values of their nuclear plants, like Fermi II. Although Detroit Edison didn't initially follow the industry lead, Mrs. Choate's warning probably saved the county budget from hemorrhaging red ink.

The county board of commissioners began socking away money more than 10 years ago, thanks to conservative spending and taxation estimates. It's left the county with a rainy day fund approaching $8 million, county administrator Charlie Londo said.

Mr. Londo said the devaluation would likely mean a retooling of the 2002-2003 budgets but that much of the loss to county coffers could likely be made up in other developments, such as those in Dundee.

County Commissioner David Scott warned Bedford Township officials earlier this month that the fiscal threat posed by a further devaluation of Fermi could mean the county will no longer be able to afford its 80 percent share of the cost of “contract” deputies.

Mr. Scott told the township, which pays 20 percent of the costs for six deputies to patrol Bedford Township, that it should prepare contingency plans if the county finds itself unable to keep its commitments.