Tax case hits keep coming

The erroneous property tax evaluation monster has struck again, and this time the bite is big. Two decisions in March, in favor of Enbridge and its pipeline that cuts across the state, in Minnesota Tax Court mean that Carlton County will need to find about $1 million to return to the utility.

There have been several such corrections in evaluations for utilities in the past few years, but the decisions last month, which cover how Enbridge property was valued and subsequently taxed for for five years beginning in 2012, is a hit that eclipses all those earlier cases.

Carlton County assessor Kyle Holmes has been waiting for the big hits. Enbridge still has two more years of evaluation wending through the tax court. While Enbridge has said it would seek ways to ease the burden of tax refunds, Holmes said he hasn’t heard how the utility might work with the county. The amount the county needs to return to Enbridge totals more than all the past cases combined, Holmes said.

He said he has also been waiting to hear if the Department of Revenue will appeal the March decisions, giving counties in the state some time, at best. As of this week, no filings for appeal were listed with the tax or appellate courts. The Department of Revenue told the Pine Knot News that it is declining comment on the cases.

The department said it would only consider filing an appeal once a judgement is finalized. The tax court has ordered that recalculations be done by mid-April based on its findings.

At issue is the formula the state has used to evaluate utilities. It’s a problem that still exists today and needs to be fixed, Holmes said, or tax refunds will continue to nick local government bodies that have no say on the evaluation formula. Holmes said some work has been done to lobby in the state legislature for valuation fixes and for some relief in paying back the taxes. Across the state and in the county, the paybacks, which include 4-percent in annual interest accruals, are enough to break county and township budgets.

“We keep going in a circle,” Holmes said.

The Minnesota Tax Court cut the Enbridge pipeline value by a combined $2.2 billion from 2012 to 2014 after adjusting the weights for different valuation approaches. It said the state overvalued its property by 40 percent in some years. The Enbridge property is the Minnesota portion of the Lakehead system, an interstate petroleum pipeline that spans 1,900 miles across the United States and Canada. In Minnesota, portions of the system are located in Aitkin, Beltrami, Carlton, Cass, Clearwater, Hubbard, Itasca, Kittson, Marshall, Pennington, Polk, Red Lake, and St. Louis counties.

“This is the worst-case scenario — it is the tsunami,” said Matt Hilgart, government relations director for the Association of Minnesota Counties, in an interview with the Star Tribune last month. He said that in two small counties, Red Lake and Clearwater, refunds due to Enbridge could eclipse their annual tax levies. For larger counties, refunds — “in the best-case scenario” — could still lead to tax increases, service cuts or depleted reserves, Hilgart said.

Counties are on the hook for the largest percentage of refunds but cities, schools and townships will also see slices come out of their tax pie.

In most of the utilities lawsuits, the largest impacts are in Perch Lake, Sawyer, Twin Lakes and Silver Brook townships, which hold the bulk of utilities facilities and lines.

Enbridge and Northern Natural Gas are two of the largest taxpayers in the county. Each has won major tax cases.