AVON LAKE — The devaluation of the NRG Energy Plant, a facility that was once slated to close but could be converted to a more environmentally friendly operation, will cost millions in tax revenue to city and school coffers and officials communicated Wednesday night how the lost will affect financial forecasts for years to come.
“It’s a very uncertain future,” Avon Lake Mayor Greg Zilka said. “We are trying to stabilize the finances of the city.”
On top of reductions to the state local government fund and the elimination of the estate tax, the significant loss in revenue from NRG could be “the straw that breaks the camel’s back” for the city, Zilka said. Avon Lake’s loss is an estimated at $158,000 a year.
Avon Lake Schools Superintendent Bob Scott said the district is set to lose about $1.3 million in annual revenue. The district passed an 8.28-mill levy in May to bring in additional revenue, but the long-term effects of the devaluation will mean the loss of $10 million over the life of the 10-year emergency levy.
“We have no recourse to prevent this from happening,” Scott said. “What we can do and are going to do is communicate to residents now that we are working hard to minimize the impact of the loss.”
Local officials learned in October the devaluation of the plant by the Ohio Department of Taxation would take the company’s value related to Public Utility Personal Property tax from about $35.9 million to nearly $16.4 million.
“This is a dramatic drop, something we wouldn’t expect,” Lorain County Auditor Craig Snodgrass said. “If you look at history, devaluation is about 5 percent a year based on depreciation. This was 54 percent. It was beyond drastic.”
Wednesday’s informational meeting, called to squash potential rumors about school and city finances, did not mention the need for additional tax levies to make up the lost revenue. City and school officials said they are confident that, with work, they will be able to absorb the lost revenue into the existing budget.
“It will force us to look at things harder and further out, especially high-dollar items,” Scott said. “Capital improvement plans will be looked at to determine the best time to do any kind of work. We are OK now thanks to a levy that just started bringing money into the district six days ago, but this is something we definitely cannot ignore.”
Zilka said the city will “tighten its belt” even further and is planning a meeting soon with representatives from JobsOhio to discuss ways to push economic development in the city. Boosting the city tax base will help take the burden off taxpayers, Zilka said.
While school and city officials, in addition to a number of other players, including the Avon Lake Public Library and Lorain County Joint Vocational School, are working to lessen the impact, officials with NRG said they are working to keep up with plans to convert the 732-megawatt plant from coal-fired to natural gas.
Shuttering the plant, the original plan, would bring the PUPP down to zero and would have been even more detrimental to the city. NRG called on residents to rally around the project, which would make the plant viable for years to come.
“This plant was ready to shut down. You accepted that as well as we did,” said David Gaier, spokesman for NRG. “Now, we’ve breathed some life into the plant, but there is still a very real possibility the natural gas pipeline we need to make the conversation work will not happen.”
NRG still needs to gain regulatory approval from the state, obtain right-of-way easements and environmental clearances for the pipeline, which is expected to be at least 36 inches in diameter and stretch about 20 miles from Avon Lake to Grafton.
Without the pipe to supply the fuel it requires, the plant will close.
Zilka said Wednesday’s meeting was the first time he heard closure was still a possibility. He thought the city dodged that bullet when NRG was granted a one-year extension to examine the conversion, which is in response to stricter federal Environmental Protection Agency rules to limit air and water pollution.
Gaier said shuttering the Avon Lake plant is not the focus of NRG. It sees potential in the plant.
But the pipeline as to be actively moving forward by April 15, 2015, for the conversion to remain a viable option opposed to closing.
In the meantime, Zilka and Scott said the city and district will focus on watching their respective budgets and getting the message across to residents that everything is critical — especially city operating and emergency services levies that will go on the ballot in 2015 and a schools permanent improvement renewal that will go before voters at roughly the same time.
Who’s losing with the devaluation of the NRG Energy Plant?
- Avon Lake Schools $1,184,863
- City of Avon Lake $158,865
- Avon Lake Library $54,714
- Lorain County Joint
- Vocational School $47,875
- Other county entities $253,287
- Total loss in 2014 $1,699,604