The state Tax Department is asking lawmakers for an extra $150,000 to prepare for potential litigation by TransCanada against five towns on the Connecticut River - including Vernon and Rockingham - where the hydroelectric giant is disputing 2010 state property valuations.
Tax Commissioner Mary Peterson explained to the House Appropriations Committee that the extra funds would go to defend a 2010 statewide appraisal of the dams, which cost $200,000. If necessary, the funds would cover the expenses of expert witnesses in court.
The $150,000 being requested would come from the state's education fund.
If the dams are overvalued, TransCanada will pay a higher and unjustified level of property tax. If the dams are undervalued, these five towns and the state will lose out on expected property tax revenue.
Peterson said the contingency planning wasn't entirely unexpected, as “utility appraisals are just complex. Their incomes are based on what the markets are doing at any given time.”
Bill Johnson, the department's director of property valuation, said that the maximum potential loss to the state stands at $4.3 million, on the highly unlikely assumption that the value of all five dams drops to zero.
It's too early to tell how much the state might lose, as it's unclear how much of a devaluation of their dams TransCanada is asking for, Johnson said.
The Tax Department prefers to negotiate settlements between TransCanada and the towns, Johnson said, because if TransCanada prevails in the courts, it could then dispute property valuations in 21 other towns in Vermont where it owns property.
“I suspect that if they got reductions in most or all of these [five] towns, they'd probably look for similar types of reductions in lots of the other towns that have TransCanada properties,” said Johnson.
The company has experience in winning utility appraisals in court: one in Concord in 2009, and another in disputing the valuation of the Bellows Falls dam last summer.
Litigation costs are likely to be borne mostly by the towns, which would probably be the primary defendants in any suit. The state wants to aid towns in shouldering those expenses, if need be.
In addition to Rockingham and Vernon, TransCanada has appealed property valuations in local superior courts affecting Waterford, Barnet, and Newbury.