Editors Note: This article was originally published in the Sept. 27, 2023 issue of the Chronicle Progress. Some information may be outdated.
Commissioners vote 2-1 to accept offer from Intermountain Power; details not yet public
Millard County’s long-running property tax dispute with its largest taxpayer may soon end.
County commissioners voted 2-1 last week to accept a settlement offer made by Intermountain Power Agency that would halt litigation over the entity’s disputed 2014 tax valuation and nearly a decade’s worth of subsequent challenges filed each year since.
In fact, this is the first year, officials say, IPA hasn’t challenged the value placed on its assets by the state’s Tax Commission and its Property Tax Division.
IPA is a centrally-assessed taxpayer with assets in multiple counties. Its tax dispute with the county has been a costly fight, officials say, costing taxpayers hundreds of thousands of dollars.
Commissioner Bill Wright was the lone holdout on the commission, voting against accepting the settlement.
He told the Chronicle Progress he was in favor of settling the dispute but also believed the county could get a better deal by countering IPA’s settlement offer, details of which are not yet public. A protective order from a judge is in place, preventing county officials from disclosing certain information, including about the settlement.
The county will be refunding some amount of money—one commissioner described it as a few million dollars—to IPA.
As part of the settlement, which awaits final approval by IPA’s board of directors, the county will have a few years to pay back the disputed funds. Multiple officials said the time frame would help the county’s budget avoid taking too serious a hit.
John Ward, an IPA spokesman, was asked to comment on the settlement.
“Intermountain Power Agency is pleased that a settlement of outstanding property tax appeals in Millard County appears to be imminent,” he said via email. “Settlement terms must be approved by IPA directors and participants before the agreement can be finalized. We look forward to sharing more details of the settlement at that time.”
County officials generally agreed that new growth expected within the county over the next few years—especially IPA’s new hydrogen and natural gas plant under construction and expected to begin operations in 2025—would help avoid any budget problems from paying the refund.
Commissioners Vicki Lyman and Trevor Johnson, who are both employed by Intermountain Power Service Corporation, an IPA entity, both said they favored the settlement offer, calling it the best offer the county received during the decade-long dispute. Johnson said the offer was a counteroffer to one made by the county earlier in the summer.
“When Trevor and I first got in, with talking with Sheri Dearden, she’s been treasurer since all this started, and she told us a number. I guess I can’t really say the number, she told us a number that if we get down below this number that we should settle,” Lyman said.
Dearden, who left her elected office over the summer to become chief operating officer at the Utah Association of Counties, confirmed Lyman’s account.
“There is a number that I felt like if we were to continue in court, basically, on the valuation principles, there’s some points we have a really strong case and some they have a really strong case on, so we would probably come somewhere in the middle,” she said. “So it’s like, okay, if we can get to that number, I don’t think we’re going to do any better in court.”
Dearden said another factor in favoring settling the costly dispute was the elimination by the state legislature of IPA’s municipal tax exemption, a 14-percent tax break originally meant only for power sold to Utah municipalities but for years used by IPA on power sold in California.
“My biggest point on that was I always felt the municipal exemption was unfair. That was the one I was willing to continue all the way through the court process on,” she said. “But we got a legislative fix to that last year. So that kind of eased my concern in we don’t have to take it all the way through court to solve that issue.”
The county manages a $12 million rainy day fund that could be tapped to pay the agreed-to refund, but that would also trigger a ballot initiative to get voters’ approval to spend the funds.
Normally, any loser in a state property tax dispute would have 60 days to fully refund the overpayment of taxes.
Millard School District is expected to walk away from the tax dispute held harmless, meaning it won’t be forced to refund any money, though it is actually the larger beneficiary between it and the county from property tax revenues.
Wright said he thought it was unfair to force the county to refund money while not seeking a similar payment from the school district.
“I think that’s wrong. I think governmentally that’s a stupid process (to allow a large taxpayer to pick and choose which taxing entities within a county to file a tax appeal against),” he said.
Wright said he suspects letting the school district off the hook was always part of a strategy employed by IPA to divide the community over the dispute.
“Regardless of what everybody thinks around here, that’s what they did. They looked at it strategically, what can we do to win down there, and that’s what they did,” the commission chair said.
Wright said he was always in favor of settling the dispute, mostly because he doesn’t trust the legal process to rule in favor of the county.
County Attorney Pat Finlinson said he also favored settling the dispute. He said taking the case through a trial presented significant financial risks to the county if the county failed to prevail.
Lyman said she talked to other county elected officials before the vote took place last Tuesday and was left with the impression most officials were happy to settle the case.
The Chronicle Progress did speak to one county employee who said they were not in favor of settling. They did not wish to go on the record with their comments, but said they believed the county could win in court on the case’s merits and be in a position not to pay money back but get potentially millions of dollars in taxes owed. The official, who was not authorized to speak publicly, also said that at the very least the county should have waited longer and sought better terms before settling the dispute, suggesting that IPA would have agreed to more favorable terms with the county closer to the next legislative session, when multiple proposed changes to state law might affect IPA.
Evidence of that was witnessed in St. George last week when the legislature held multiple interim committee meetings at Utah Tech. IPA came up multiple times in discussions, including one focused on revamping the state’s centrally-assessed taxing regime in order to make it less risky for small counties and their meager financial resources.
During the Sept. 18 Revenue and Taxation Interim Committee meeting, Lincoln Shurtz, a legislative consultant, spoke on behalf of the Utah Association of Counties and described various real-life scenarios, including IPA’s 2014 tax appeal, and their potential for wreaking havoc on county finances.
He said state law was in conflict, for instance, with how county revenue is spent and saved. Counties can only set aside 20 percent of annual revenues by state law, for example, and yet if a county the size of Millard loses to a taxpayer as large as IPA in court, the back taxes owed on nine years worth of tax appeals could essentially cost the county 100 percent of its annual revenue and more.
He said no carveouts in the law currently exist to protect counties from such a scenario.
“It puts you in a pretty untenable position from a budgeting standpoint,” he told the committee.
At the end of the discussion, the committee voted to open a bill file for the next legislative session for proposals that could alter how centrally-assessed properties and their tax appeals are handled in the future.
Beyond changes in centrally assessed taxation, IPA also awaits the findings of a legislative audit, which could be made public as soon as October. Multiple officials, including Wright, have said they believe the audit will include some information that shows IPA has not always acted fairly in its dealings with the county and taxpayers.
Multiple officials were asked why commissioners didn’t wait until the audit was finished before settling the tax case. Wright said he considered the issue a moral one and wouldn’t seek such leverage in negotiating a settlement with IPA.
Johnson said the results of the audit could go either way, including by benefiting IPA and harming the county’s ability to settle potentially.
Asked whether they were afraid of any potential grief from the public over settling with an entity that employs a two-thirds majority of Millard County’s executive body, both Johnson and Lyman said they weren’t too concerned with the appearance of a conflict.
“I guess for me I’m just going to say this is the best offer they (the county) ever had. It’s over a million dollars better than the best offer they had before we got in there,” Johnson said.
Lyman said she thinks her and Johnson’s positions at IPSC probably helped the county score a better settlement offer.
“I tell you what, I think we got the best deal we could get,” she said.
The 2014 tax dispute that started the long-running fight with the county centered on a $500 million difference between the value IPA placed on its assets and the value the state’s Property Tax Division placed on them. That value difference became public when IPA submitted disclosures ahead of a bond sale last year.
IPA appealed its annual valuation every year since 2014, except for this year, when, ironically IPA’s centrally assessed valuation went up for the first time in years, thanks to the elimination of the municipal tax exemption.
IPA challenged its property tax valuation 17 times in the 33 years between 1988 and 2021, according to tax commission records. IPA won reductions of its tax burden eight times, totaling more than $707 million in reduced value and costing local governments at least $7.2 million in revenues, according to previously reported calculations provided by county officials.
