Moose Lake Star Gazette - Serving Carlton and Pine Counties Since 1895

By Dan Reed
Moose Lake Star-Gazette 

State revenue, utility providers go to mediation


March 30, 2017

Carlton County Commissioner Gary Peterson and county assessor Kyle Holmes attended an Enbridge presentation in Floodwood March 3 concerning Enbridge’s litigation with the Minnesota Department of Revenue over the level of property taxes paid by the pipeline company and other utility providers. Enbridge is the lead in this tax discussion and litigation. A decision will affect other utility providers and the taxes they pay counties, townships, cities and school districts.

A second try at mediation between Enbridge and the state Department of Revenue was set to be held March 27 and 28. The Department of Revenue was not helpful during the first mediation session. A decision should come in eight to 10 weeks. If not successful, the parties will go to court in the fall with a decision in about two years.

The area affected locally and most severely is the northeast portion of Carlton County. The tax level for each of the local utilities has been set by the Minnesota Department of Revenue for many years and the local taxing authorities must follow their directives.

In a phone interview with Carlton County Coordinator Dennis Genereau, he commented, “The county has been in touch with the Association of Minnesota Counties (AMC) and their policy analyst, Matt Hilgart. Hilgart said counties throughout Minnesota are concerned that taxing units will have to pay back tax monies that have been levied in past years. In some counties, a poor decision in favor of Enbridge, as one of the largest affected utilities, would impact some counties in the millions of dollars.”

Genereau continued, “AMC is looking to the state Legislature to help with the payback if the decision is in favor of Enbridge. If this happens, we in Carlton County would like to continue to remind Enbridge that the Carlton County Board of Commissioners has been very supportive of Enbridge plans to replace pipelines and construct a new corridor across our county. Now we need Enbridge, if they are successful, to help minimize the impact financially on the local taxpayers in actions that Enbridge could take as an important economic force in our community.”

A discussion whether an information press release should go out at this time was held at the committee of the whole meeting on March 7. Commissioner Dick Brenner said, “We should put it out there. We can only give the facts as we know it now.”

The following is from the press release provided at that meeting:

The State of Minnesota Department of Revenue (DOR) is in the midst of addressing a multitude of Minnesota Tax Court petitions of both above and below ground energy and utility providers statewide. These carriers include oil and natural gas pipelines and electric power transmission lines.

The formula the DOR uses to value this infrastructure is very complex and, in some regards, different from the formulas used by our neighboring states, but in Minnesota much of what DOR does is prescribed by state law. A number of utility providers have questioned the DOR’s formula, and some have even decided to legally challenge the DOR formula in Minnesota Tax Court.

The legal challenges that have been made question not just current valuation but also past valuations dating back eight years or more. When these legal challenges are resolved it is possible that both the current and past taxable value of these carriers could change in a positive or negative manner.

If the tax court rules to reduce one or more carrier’s value, it is in essence ruling that the carriers or carriers are or were valued too high of an amount and therefore paying too much in tax or shouldering a greater burden than they should have. Should such a ruling occur, the tax court can also order that the difference in taxes be paid back to the carriers.

Even though the State of Minnesota, and not the local taxing authorities nor the county, is solely responsible for setting the Estimated Market Value for taxing purposes, it is likely that the State of Minnesota will not be held responsible for paying back any difference without legislative action. That responsibility will fall to the local taxing authorities, including the counties, cities, townships, schools, etc. It is important to know that these carriers’ values are given to the county as orders and we enjoy the benefit of the taxes they provide. On the reverse, we bear the responsibility should the courts determine over-evaluation and overpayments that have occurred.

While the tax court has not made any final decisions on this matter, it does appear initially that there will be some valuation adjustments and corresponding tax pay back obligations. We have been relaying this information to the local jurisdictions that are most likely to be impacted as well.

It is important to remember that nothing has been finalized yet, though, as far as impacts, and being that the litigation is between the utility providers and the state, much of the information is classified even to the top county officials. We at the county are trying to be proactive as much as we can with these developments, but ultimately it has been hanging out there for years without much new information. We now believe we are at a point where over the next several months to a year at least some of these carriers will have reached settlements with the DOR therefore providing a clearer picture of potential impacts to Carlton County residents. We will continue to monitor this situation and strive to provide timely and accurate information to our citizens and local elected officials as the facts of these cases are provided us.


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