July 29, 2014

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Avon Lake officials discuss plant devaluation

Devaluation of the NRG Energy plant will mean costly annual property tax losses for the city and county. CHRONICLE FILE PHOTO

Devaluation of the NRG Energy plant will mean costly annual property tax losses for the city and county. CHRONICLE FILE PHOTO

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.

Contact Lisa Roberson at 329-7121 or lroberson@chroniclet.com. Follow her on Twitter @LisaRobersonCT.

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

SOURCE : Lorain County auditor

  • formerlorainresident

    Here we go again! The enormous, 10 year levy which was passed last year under the guise that the NRG energy was going away forever, only to learn right after the levy was passed that it actually is not completely going away, now since it is going away partially, we again need more money.

    Are the schools serious? Any income from the NRG plant moving forward is a “bonus” to the Avon Lake schools. Now they once again are going to use this as a reason to come back to the community for more money? And yes, make no mistake, they will be coming back for more money.

    It is interesting to note, that when faced with a potential shortfall, the A.L. schools made a commitment to cut nonessential services, classes and activities. Once the levy passed, these suddenly became essential again.

    The residents of this town have been more than generous to the schools. It is time to live within your means like the families in town must do.

    So why is this viewed as a catastrophe to the schools, when we were led to believe last year that this plant was closing entirely? This was the issue that was sold to the voters, and agreed upon with the passage of the levy. To me, it looks like a windfall, given there will be any tax dollars generated at all.

    Interesting that the Obama administration led EPA is responsible for the plant closing, or having to convert to natural gas in the first place. The National Education Association is one of the largest contributors to Obama’s/Democrat’s re-election campaigns. He in turn forces the closure of this source of revenue to the the school system, and the income to the very people who ardently have supported him and his EPA policies. Driving away business through excessive regulation has finally “hit home.”

    I suggest A.L. schools follow through with the cuts they promised prior to last years election and passage of the levy. I can assure you, there will be no more money coming from the voters. We have learned our lesson, even myself who supported the levy last year. I now feel the school system was not honest with the voters and will not repeat the same mistake.

  • alreadyfedup1

    Well, well, well going back to the well again and again. Typical. I would like to thank Herrod Brown and all his liberal friends for the WAR ON COAL. Now we have boondoggle in levies and taxes “oh what to do with the excess”. These politicians know how to get into the pockets of the public.Give the money back that is the right thing to do.

  • Mark B

    Global warming and the EPA are killing this country. keep you pocket books open as the goverment will constantly be needing more money to support their lies. Hope the School systems continue to instill the same lies in the children so this can contine a few more generations .

  • Terskac

    Fracking is what is killing the coal business. Fracking technology made natural gas from shale cheaper than coal and extremely plentiful. The collapse of natural gas prices because of the new enormous supply is why coal is dying. Gas is cheaper and cleaner than coal. We used to build natural gas importing facilities for ships. Now those same ports are being converted to exporting our enormous supply of gas. Markets killed coal. No one wants to build new coal burning plants anymore anyway. Demand for electricity is slowing and gas is cleaner and cheaper. Hopefully the GenOn plant will get its pipeline and convert to gas.

  • formerlorainresident

    Here it comes, $6.5 M PER YEAR in new taxes to the A.L. Schools, base on their claim that NRG Energy was closing forever. Now if is only reducing capacity, therefore the schools will retain some tax revenue from the plant.

    So, they are getting something, when they said they were getting nothing, but now they still need more? This position defies all logic.

    See below from Morning Journal, January 17, 2014:

    “Residents of Avon Lake, Midview, North Ridgeville and other school districts may have “sticker shock” when they get their county property tax bills this month,” said Lorain County Auditor Craig Snodgrass.

    In the Avon Lake school district, voters in May 2013 approved an 8.28-mill additional emergency levy that will generate about $6.5 million a year for Avon Lake schools. The new tax rates will lead to an annual increase of $281.15 for owners of homes valued at $100,000.

    The property taxes could change again and Avon Lake school and city officials already are bracing for less revenue due to a lower property value of NRG Energy Inc.’s power station on Lake Erie.

    Are they serious?