TEXT-Fitch: Citrus County local governments manage tax challenge

Tue Jan 29, 2013 3:06pm EST

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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.
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