SPSA on the hook for $500K in taxes to Portsmouth

PORTSMOUTH

SPSA, like all government agencies, is exempt from paying property taxes.

So some board members of the Southeastern Public Service Authority were surprised to learn this week that the garbage agency will pay more than $500,000 to help cover property taxes owed to the city of Portsmouth by a private company that last year purchased a garbage-burning power plant from SPSA.

"I find this absolutely incredible," Marley A. Woodall Jr., who represents Chesapeake on the SPSA board, said at a meeting Wednesday.

Why, Woodall wanted to know, would a tax-exempt agency agree to pay taxes for something the agency no longer even owns?

He also asked whether SPSA can legally pay for property taxes when state code forbids it.

"Can we write illegal stuff into a contract?" Woodall asked. "We can do that?"

As other board members and staff squirmed in their seats or smiled wryly, SPSA's executive director, Rowland "Bucky" Taylor, explained.

As part of the $150 million contract last year to sell the power plant to Wheelabrator Technologies, a contract approved by a different board, SPSA pledged to pay a percentage of local property taxes to seal the deal, Taylor said.

"We're not really paying their taxes," he said. "It's more like an agreed-to fee."

The contract with Wheelabrator, a branch of corporate giant Waste Management, is up for renewal in 2014. Woodall, still shaking his head, said, "If we get a chance to vote on this again, I'm voting no."

The discussion began when Wheelabrator's plant manager, Paul Grego, updated the board on various matters at the Portsmouth plant and mentioned that "the assessment situation" had been resolved.

To determine how much property tax is due to Portsmouth, the plant initially was assessed at more than $144 million. Wheelabrator contested that value as too high, Grego said, and a second assessment by the State Corporation Commission put the worth at a shade over $111 million.

On Thursday, Taylor further explained that SPSA had agreed in the fine print of the purchase contract to pay Wheelabrator a fee equal to about 91 percent of property taxes over $1 million.

Using the second assessment, Wheelabrator owes Portsmouth more than $1.4 million for 2012 - meaning SPSA must reimburse the company about $347,000, Taylor said.

But Portsmouth also will likely seek taxes from part of 2011, after the plant was sold to private hands, Taylor said - meaning SPSA would pay another $176,000.

Taylor agreed that more than $500,000 is a lot of money to an agency still struggling to get its financial house in order after nearly going bankrupt two years ago.

Asked if he would like to renegotiate this part of the contract in 2014, Taylor said, "There's a lot of things I'd like to change, and I'm sure there's some things that Wheelabrator would change, too."

But probably not the property tax payment.

Scott Harper, (757) 446-2340, scott.harper@pilotonline.com