May 7, 2014

KITCHELL: Taxes, like them or not, necessary evil

There are many questions still to be answered when it comes to the proposed purchased power agreement on the table for Logansport city officials to consider.

With city council and Utility Service Board votes scheduled before a public meeting where the owners of the utility — that’s us — have a chance to ask questions and to decide if this is something Logansport should have and want, the initial question is, “What’s the rush?”

Before those votes are taken and before local residents walk through the door of McHale Performing Arts Center next Thursday, it’s important to think about the idea of the city being forced to purchase power from a plant it won’t own for two decades or longer. How will it be maintained? If we choose to take over ownership in 20 or 25 years, what guarantees are there that we would want it, and if we don’t, whose responsibility will it be to clean it up, close it or tear it down?

But the two primary points to consider are that the initial rate being proposed, which would be less than what Duke Energy is charging us now, would only be in effect for a few years. After that, it would be subject to the open market. That doesn’t lock in prices for the long term or give industrial site selection officials much to go on in terms of what industries compared to other cities that have long-term agreements in place. In short, there’s a good chance that even after this plant is built, the rates we could be paying will be higher than what we’re paying now or paying Duke.

Second, the mayor’s claim in a report by WLFI claims that this plant could represent the end of property taxes. Hmmm. That’s a great bandwagon statement, but the reality is that while many of us live in Logansport or the Logansport Municipal Utilities service area, there’s more to property taxes than just the city’s share. Township, state, county and library taxes are part of the rate, too, not to mention a factor that takes up the lion’s share of the rest of the rate, the school tax. To say that any project like this is going to eliminate property taxes is absurd, though it plays to voters who may not understand that the city doesn’t control everything that goes into property taxes. Even if a generating plant could generate enough revenue for the city to equal the amount the city pays, the state would likely require a tax rate in case something happens to the plant, such as revenue not meeting projections. There’s also the reality of the debt situations to consider. The proposed charette plan to redevelop the Logansport Mall will require some significant public funding that will either require paying a private developer (at the developer’s profit) or draining much of the funding in the Tax Increment Financing (TIF) District combined accounts. If the latter happens, it would place much of the city’s available financing dollars in one basket and could hamstring economic development in those districts for several years.

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