Predicting discord in power plant property tax assessments.
Antonio R. Paez (apaez@daimc.com) is a senior financial analyst with DAI Management Consultants. David C. Rode (drode@daimc.com) is managing director, and Steve R. Dean, ASA PE (sdean@daimc.com) is managing principal of the firm. The authors acknowledge the contributions of Jennifer Presto.
One of the best means by which to predict future conflict is to look for two parties moving in fundamentally opposite directions. There exists such a situation in many areas of the United States when it comes to tax assessment of power generating real property. Indeed, a perfect storm might be brewing.
At a time when many states and municipalities are facing budget deficits of historic proportions, many power generators are struggling against declining demand, the lowest electricity prices in many years, and looming carbon legislation. As a result, tax authorities might be seeking to raise property tax receipts at the exact same time that many generators are looking to lower their assessments.
Conflict appears to be on the horizon, but where will it emerge? An examination of state budgets, as well as the expected changes in generator gross margins, reveals how tax collectors and taxpayers are most likely to respond.