TEXT-Fitch: Citrus County local governments manage tax challenge
Jan 29 - Fitch believes a tax dispute between the Citrus County tax assessor and Progress Energy (Progress), a subsidiary of Duke Energy, is not a serious risk to the credit quality of Citrus County (the county) or the Citrus County School District (the district). In November 2012, Progress made a "good faith" tax payment of $19.4 million, or about $15.0 million less than its original tax bill, and filed suit against the assessor's office challenging the taxable assessed valuation (TAV) of its pollution control equipment at its Crystal River nuclear plant. The origin of the tax dispute extends back more than a decade and was not entirely unanticipated. However, Progress bypassed the more routine process of filing an appeal through the county Value Adjustment Board (VAB). Under state law, the VAB is required to deny a petition if the property owner fails to make a partial payment equal to at least 75 percent% before the taxes become delinquent. Progress Energy's reduced tax payment creates a fiscal 2013 revenue shortfall of about $5.0 million for the county and $7.3 million for the school district (in each instance the revenue loss equates to about 6% of general fund spending) . These events underscore risks to taxpayer concentration in major industrial enterprises with large scale production assets that may be more vulnerable to a tax appeal, given the sizable savings that may potentially be realized. Progress Energy is the largest taxpayer in the county and school district, which share boundaries, accounting for about 16% of TAV. Fitch believes the county and the school district have taken appropriate action to resolve the current year budget deficit created by Progress's legal challenge. The county has also evaluated a number of revenue and expenditure options to address the impact on future budgets should Progress prevail in court. The school district would be more vulnerable to a reduction in Progress's TAV, given its narrower reserves and very limited revenue raising capabilities. Fitch estimates the district could lose more than $2 million in annual revenue related to its capital outlay and discretionary millage. Fitch will continue to monitor the legal proceedings and impact on county and school district credit quality. Additional information is available on www.fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.