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Published: Friday, 4/2/2004

Nuke plant shutdown leads to tax shortfall

BY TOM TROY
BLADE STAFF WRITER

The two-year shutdown of the Davis-Besse nuclear power plant has resulted in financial fallout for the city of Toledo - close to $1 million worth.

City officials said yesterday that operating losses experienced by "a major electric operator" caused that company's net income tax bill to the city to be zero for 2003, rather than the nearly $1 million that had been projected. The $911,845 shortfall contributed to a total $5.4 million revenue shortfall in the city's general fund for 2003.

After savings were accounted for - mainly by leaving positions vacant, the city booked a deficit of $2.4 million for the year, Tom Crothers, the acting director of finance, told City Council's finance committee yesterday.

The deficit was deducted from the city's $11.2 million rainy day fund. The city plans to withdraw $4.2 million to balance the 2004 budget, leaving $4.6 million in the fund.

"Unfortunately for one of these utilities, a significant event occurred in 2002 which caused their anticipated net profit to become a net loss," Mr. Crothers said.

Mr. Crothers avoided identifying FirstEnergy Corp. by name, which operates Davis-Besse, as the major electric operator, saying he is not allowed to disclose data of individual taxpayers.

However, he did not contradict other officials at yesterday's meeting who identified the utility in question as FirstEnergy Corp., the parent company of Toledo Edison Co.

Jay Black, Jr., the city's chief operating officer, also confirmed FirstEnergy as the utility and the shutdown of the Davis-Besse plant as the incident.

Mr. Crothers said that in 2002 the utility paid about $1 million in prepaid taxes based on its estimate of the amount of tax it would owe.

Because the company overpaid in 2002, it deducted that amount from 2003, and are expected to continue taking a tax loss in 2004.

Councilman Bob McCloskey said the city shouldn't have to suffer the consequences of FirstEnergy's mistakes.

"It wasn't the fault of anyone other than themselves," Mr. McCloskey said.

In the past, electric utilities paid taxes based on property valuation. Since 2002, the state has reduced utility property taxes and replaced those, for municipalities, with the tax on net income, Mr. Crothers said.

Ralph DiNicola, a FirstEnergy spokesman, confirmed that Toledo Edison took much of the financial brunt of the cost of the shutdown. He said Toledo Edison owns 50 percent of Davis-Besse, and the losses were assessed against Toledo Edison, even though FirstEnergy reported stock earnings for the year.

The unprojected utility tax shortfall, discovered last month, contributed to the demotion of former Finance Director John Bibish to a commissioner.

Mr. Crothers and Mr. Black said Mayor Jack Ford has convened a task force that will meet three times a week to come up with proposals by the end of April to further reduce spending in 2004. Mr. Black said those solutions will include more cuts and revenue enhancements - possibly a fee for trash collection.

Davis-Besse was shut down more than two years because of a near rupture of its reactor head as well as other design, management, and performance concerns. The plant received restart authorization from the Nuclear Regulatory Commission March 8 and is expected to reach full power this weekend.

Contact Tom Troy at:

tomtroy@theblade.com

or 419-724-6058.



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