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VELCO to pay towns $200,000 after property tax snafu

FERRISBURGH — Vermont Electric Power Co. has agreed to pay a total of about $200,000 to five Vermont towns — including Ferrisburgh, New Haven and Vergennes — to make up for property tax revenue those towns have lost since 2009 due to a what a VELCO official called a “miscalculation” on how it assessed property in those five towns and Shelburne.
Town and company officials agreed that over those years VELCO paid the full amount it owed in taxes. But because of its error, VELCO paid roughly $200,000 more than it should have to Shelburne and collectively $200,000 less than it should have to the three Addison County towns, South Burlington and Charlotte.
In the past week and a half, officials in those towns had talked about jointly hiring legal counsel to pursue the lost tax revenue, but VELCO on Tuesday began notifying the towns it intended to pay the municipalities for the five-year shortfall.
“We will absorb this estimated $200,000,” said VELCO Vice President of Communication, Systems and Strategy Kerrick Johnson. “And we will make the affected towns whole.”
Vergennes City Manager Mel Hawley estimated Ferrisburgh would soon receive a check for about $62,000; Vergennes, one for roughly $12,000; and New Haven, one that he said would probably land in the low $30,000s after an adjustment is made for that town’s low Common Level of Appraisal (CLA).
Numbers for all the towns are approximate at this point, Hawley said, but Vergennes and Ferrisburgh CLAs have been close to 100 percent and those numbers should be close. Still, calculations will be necessary before payments are made.
“They are going to go back to 2009 and build absolutely accurate numbers,” Hawley said.
Johnson said the process should not take too long.
“I think it’s fair to say we’re talking weeks, not months,” he said.
VELCO property is not assessed like typical commercial real estate. Because of the complexity of placing taxable values on power lines and power stations, towns rely on sworn statements from VELCO for their assessments — and the company’s statements of value for the towns were in error, Johnson said.
The cost will not be passed onto consumers, he added.
“We will make it right, and ratepayers will not be affected. They will be held harmless,” Johnson said.
Officials from the communities involved welcomed VELCO’s response.
“I give them credit for stepping up to the plate,” said Carl Cole, chairman of Ferrisburgh’s board of listers, who along with town appraiser Justus DeVries were the first to raise the issue to other towns and VELCO.
The Ferrisburgh selectboard had planned at its next meeting to address the question of whether to join in paying for an attorney, and the towns had also scheduled a meeting for this Thursday to discuss that question that was called off when VELCO broke its news on Tuesday.
Ferrisburgh selectboard chairwoman Loretta Lawrence said she was happy it was a moot point.
“We’re very pleased with all the work that Carl and Justus have done, and kudos to VELCO for doing the right thing,” Lawrence said.
Instead, the Ferrisburgh selectboard will have a more pleasant topic when it gathers again — what to do with the pending windfall.
“We’ll have to discuss it. It’s a bonus,” Lawrence said. “We’ll bring it up at the next board meeting, for sure.”
PROBLEM UNCOVERED
Johnson said it was either late October or early November of 2013 when VELCO uncovered its mistake and then self-reported the problem in a phone call to the Vermont Department of Taxes.
Exactly what happened in that conversation is unclear, Johnson said; he described it as a “miscommunication.” Regardless, VELCO officials came away with the understanding they should just start reporting what was a $14.6 million miscalculation in 2013 correctly to the six towns in 2014 rather than attempt to backtrack.
Johnson said memories of that discussion vary, but VELCO officials believe overall it is their mistake and their issue to resolve.
“There may have been miscommunication, but ultimately it is our responsibility,” he said.
While putting this year’s Ferrisburgh grand list together, Cole and Hawley said DeVries noticed an increase of almost $5 million in VELCO’s assessment, something hard to explain with no change in the number of power lines or expansion to its Long Point Road substation.
In Vergennes, with a bigger power station and fewer power lines, Hawley said a change of less than $400,000 went unremarked.
“That wouldn’t jump off the page for us,” he said.
Johnson said after towns started to contact VELCO about the issue, company officials eventually concluded they should simply fix the five years of wrongly addressed tax checks. 
“We’re glad we found it, and we wish we had communicated more promptly,” Johnson said.
For the record, Johnson said, VELCO only discovered its mistake late in 2013 “at the tail end” of a special audit of all its statewide inventory in more than 200 towns. It was the only error found, he said, even after a double-check of all equipment and accounting numbers.
The actual amount of tax revenue involved with the annual assessment mistake was much larger. But the only concern for the towns, officials said, is the portion of the payments dedicated directly to municipal services — the rest was forwarded to the Department of Education to be redistributed to the state’s school districts.
“The education taxes are paid, so there is no issue there,” Hawley said. “The issue is on the municipal tax side.”
Hawley, also a city lister, said he and DeVries had talked and were worried that the issue could “become a real distraction” if VELCO had not come through the way it has pledged to.
Now, he said, VELCO has avoided any hassles due to what he called its earlier, understandable mistake.  
“These kinds of errors can happen,” Hawley said. “Fortunately, VELCO is making us whole without any further debate.”
Johnson said the mistake happened, and then was uncovered, in the wake of major projects that included the Northwest Reliability Project that was built through Addison County earlier this past decade.
“We went from a very modest, almost sleepy little company for 20, 30 years, and then in a short time span of about five or six years built up almost $1 billion worth of assets,” Johnson said. “In that process we’ve learned a lot of lessons.”
Andy Kirkaldy may be reached at andyk@addisonindependent.com.

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