Editors Note: This article was originally published in the Oct. 11, 2023 issue of the Chronicle Progress. Some information may be outdated.
Report makes almost dozen recommendations over IPA governance, out-of-state influence, tax issues, more
A much-anticipated audit report was presented to state legislators Tuesday morning about Intermountain Power Agency and its impact on the state and Millard County.
The report contains about a dozen recommendations that could foreshadow legislative changes to how the electric power provider operates in the future and whether its outsized influence on public finances in Millard County should continue in its current form.
The report was produced by the Office of the Legislative Auditor General and presented to the Legislative Audit Subcommittee, which is composed of the Utah Legislature’s top officers in both House and Senate.
The audit was originally requested by state Sen. Derrin Owens, a Republican whose district represents the eastern half of Millard County.
The Chronicle Progress was able to obtain an embargoed copy of the completed audit report ahead of Tuesday’s subcommittee hearing, which was scheduled to take place after the newspaper’s Monday press deadline.
In an audit summary, the report lists five key findings: 1.) that IPP’s value to the state and its communities has diminished; 2.) that California power purchasers exercise the most influence on IPP’s direction; 3.) that IPA’s board of directors should institute better governance practices; 4.) that IPA has benefitted from its status as a political subdivision of the state with “limited statutory” oversight; and, 5.) that some state statutes that benefit IPA negatively impact Millard County and should be reviewed.
Recommendations regarding the audit’s key findings include urging legislators to consider a raft of policy changes, from whether the state needs to more actively “direct” IPP’s operations and reduce the influence over IPP from “an out-of-state government entity,” to policies enforcing more transparency and accountability from IPA.
In a nod to the county’s public finances and the potential negative impact of how IPP is taxed, the report recommends legislators “consider policy options for taxes to ensure statute is properly balanced between project entity and a host county.”
Millard County commissioners recently voted to settle a costly, long-running tax dispute between the county and IPA, its largest taxpayer. The county is expected to pay a few million dollars over a period of a few years to settle the dispute, which started with a 2014 decision by IPA to appeal its state-set valuation. The difference between what IPA calculated its 2014 valuation to be and what the state’s Tax Commission set was off by $500 million.
IPA appealed its valuation every year after 2014 until just this year. The county and IPA were involved in litigation over the matter. And a loss in court could have potentially wrecked the county’s finances.
IPA’s board of directors and other stakeholders have not yet approved the settlement.
Normal depreciation of IPA assets combined with similar valuation disputes involving multiple entities that operate within Millard County have sent local property tax bills skyrocketing over the last few years.
A shortage of housing inventory and rising real estate prices have magnified this subsequent shift in local tax burden, with centrally-assessed entities like IPA contributing less and less to the local tax base while homeowners and small businesses have been forced to contribute more and more.
IPA officials were allotted space in the completed audit report to respond to the state auditor’s findings and recommendations.
One of IPA’s first responses was to acknowledge that it was slow in getting auditors some records, which auditors noted in the report and warned of possible risks involved from their inability to acquire certain information. IPA committed to doing a better job of complying with records requests in the future.
IPA also said it wished to work cooperatively with legislators on any policy changes they may consider.
“IPA understands the Legislature’s prerogative to reflect state policy through legislative enactments and does not presume to dictate what such policy should be,” IPA officials wrote. “IPA would appreciate the opportunity to provide supplemental information to legislators as they consider actions that could have significant long-term impacts on IPA, the nearly completed repowering of IPP (“IPP Renewed”) and the Utah municipalities that have been central to IPA’s purposes since the inception of IPP.”
IPA officials outlined issues they felt spurred some of the recent enmity from lawmakers—legislators stripped numerous statutory benefits from IPA during recent legislative sessions, including nixing a 14-percent tax break on electricity sales to California municipalities IPA enjoyed for years.
IPA officials outlined in its responses how it was forced by California policy changes to transition from coal-fired electricity production to less carbon-intensive methods. How coal shortages eventually harmed IPA’s ability to keep a long-held promise to buy only Utah coal for its plant. How Utah communities benefitted from out of state power sales. How Utah representation on the IPA board actually runs counter to the audit report’s findings regarding out of state influence. And how IPA is leading the way in billions of dollars of new investment in the state and Millard County, among many other responses.
IPA also noted its tax dispute with Millard County and proposed settlement.
“IPA is committed to working with the Legislature and Millard County to find a balanced approach to addressing state taxes and fees in lieu of property taxes,” IPA officials wrote. “IPA on September 28, 2023, received notice from Millard County that IPA’s latest offer to settle all outstanding tax appeals is acceptable. IPA has long advocated entering into a long-term arrangement with the county regarding valuation of IPP assets, subject to the County’s agreement.”
Millard County officials were also given an opportunity to respond to the audit’s findings.
Commissioner Bill Wright, in a short letter attached to the audit report, wrote that he looked forward to a brighter future and welcomes “any industrial business that wants to be partners in the development of our assets for the benefit of all the citizens of the State and Millard County.”
“Government operations should provide equal opportunities, equal privileges and equal responsibilities for every residential and business taxpayer,” the commissioner wrote. “The audit has highlighted areas of concern and gives us a road map to move forward to improve relationships between IPP, IPA, the State of Utah, and Millard County.”
The audit report was set to be made available to the public after the audit subcommittee meeting. The report can be found by visiting the Office of the Legislative Auditor General online at olag.utah.gov.
