TVA fees in lieu of taxes for state up $7 million

February 8, 2012

By STEVEN NALLEY
citybeat@bellsouth.net

Representatives from Tennessee Valley Authority expect the company to pay approximately $7 million more in fees in lieu of taxes to the state of Mississippi in fiscal year 2012 versus fiscal year 2011.
Federal government-owned corporations like TVA pay fees to states where they operate in lieu of state property taxes, which do not apply to federally-owned land.
The methods TVA uses to calculate those fees vary from state to state, TVA media relations staffer Mike Bradley said, and so do the methods states use to allocate fee revenue across counties, cities and schools. In Mississippi, he said, fees equal 5 percent of gross power sales, amounting to $33,155,137 in fiscal year 2011.
“This is part of an economic development effort to help communities in those areas (where TVA operates),” Bradley said.
Andy Schoerner, TVA program manager for tax equivalent payments, said projections call for TVA to pay $567.4 million in fees across the seven states where it provides electricity in fiscal year 2012, versus $529.6 million paid in fiscal year 2011. Projections for Mississippi, he said, call for $40.1 million in fees this year, an increase of about $7 million.
“When we do talk about tax equivalents for fiscal year 2012, it’s based on the previous year’s power revenue,” Schoerner said. “There was a revenue increase in fiscal year ‘11 versus fiscal year ‘10. It was roughly $1 billion.”
Schoerner said electricity rate and revenue fluctuations are complex, but the primary driver for the increased revenue was an increase in fuel costs.
“The price of fuel is a part of the bill, so as the fuel cost goes up, it’s supposed to drive the bill up,” Schoerner said. “It wasn’t because necessarily we sold more electricity.”
Amy Tate, TVA Mississippi District public relations manager, said state legislatures set the formulas to distribute revenue from TVA’s fees. Tate gave a presentation on fees in lieu of taxes to the Oktibbeha County Board of Supervisors at its meeting Monday.
“(Fee revenue distribution is) based on power sales, and it’s also based on assets in the area,” Tate said. “How they use those funds is up to the cities and the counties.”
Oktibbeha County Board of Supervisors President Marvell Howard said no specific plans are set for the extra fee revenue yet.
“One thing that jumps into my mind is it could be used to offset the shortfall that we are experiencing in our garbage collection to help keep from raising garbage fees,” Howard said. “(There are an) unlimited amount of things that extra money could be used for. Whatever we get, we’ll put it to good use.”
Oktibbeha County Administrator Don Posey said the funds go into the same pool as ad valorem taxes and other revenue sources. He said the role of TVA assets in the state’s distribution formula mean other counties are likely to see more benefits of the statewide fee revenue increase than Oktibbeha.
“I don’t think it has as much effect (on Oktibbeha as on) Lowndes and other counties that are closer than us to transmission lines,” Posey said. “They have a lot of big transmission lines that are assessed.”
Posey said Oktibbeha has historically received its share of the fee revenue the December after each fiscal year ends. At the end of fiscal year 2010, he said, Oktibbeha received $97,000, and for fiscal year 2011, the share went up to $101,000.
Schoerner said fee revenue for Mississippi actually decreased from fiscal years 2010 to 2011, falling to about $33.1 million from about $33.9 million.