TVA In Lieu Of Tax Payments Down $25 Million

Tuesday, February 18, 2014

Estimated payments from the Tennessee Valley Authority (TVA) for Tennessee and other states in the region served by the authority are $25 million less for the federal fiscal year 2013-14 than the $547 million in actual payments for the previous fiscal year.  This will be the second consecutive year in which TVA revenues and payments declined.  The estimated decline in payments results from the continued slow pace of economic recovery, the loss of a major direct industrial customer, greater energy efficiency, and mild weather.  Even with the severe winter weather this year, TVA is expecting another decline in electricity sales.  The agency reported in early February that electricity sales in the final three months of 2013 were down $245 million from last year.

The TVA payments, which are known as payments in lieu of taxes, or PILOTs, are divided among the states based both on revenues from power sold and on the value of power-generating property owned by TVA in each state.  Tennessee, by far the single largest recipient of these payments, received $337.7 million in fiscal year 2012-13 and more than 60% of total payments made since 2011.  Since the state distributes close to half of that money to cities and counties, declines in the PILOT negatively affect not only state funds, but also county and city funds.  The estimated decline for the current year amounts to $2.7 million in the distribution to Tennessee’s county governments, slightly more than $1 million in the distribution to cities, and approximately $3 million to the state and its agencies.

The Tennessee Advisory Commission on Intergovernmental Relations, the agency charged with monitoring changes in the wholesale distribution of electric power by TVA and its distributors for possible effects on the PILOT, reporting annually to the Tennessee General Assembly and recommending changes as appropriate, noted in this year’s report that a number of the innovative financing methods used by TVA could further affect the PILOT.  The methods, developed in order to stay within the $30 billion debt ceiling imposed on it by Congress in 1979, include the use of sale-and-lease back and lease-and-lease back arrangements.  A sale-and-lease back arrangement between TVA and an electric generation and transmission cooperative could affect the distribution of payments made by TVA to states in the region and could negatively affect state, county, and city funds, as was the case in Mississippi following the sale of TVA’s Southaven and Caledonia plants.

Under the arrangements at Southaven and Caledonia, TVA operated the plants and all sales of electricity produced were through TVA.  Revenues were counted as TVA revenues and subject to the total PILOT.  Although the fact that TVA didn’t own the plants didn’t affect the PILOT allocation across states, it did affect the PILOT distribution to the state of Mississippi.  With a sale-and-lease back arrangement, the amount of the TVA PILOT that goes through any particular state’s own allocation formula would decrease to the extent that TVA must reimburse the new plant owners for taxes paid to the state or local governments.  For the State of Mississippi this was a reduction of $6.0 million in 2013, the amount TVA paid for local taxes.

So far, generating expansions in Tennessee have been through lease-and-lease back agreements.  An example is the natural gas combined cycle plant in Rogersville, Tennessee, which was completed in 2012 and leased to a private company.  The company paid TVA $1 billion for the lease and leased the plant back to TVA for 30 years.  The plant is managed by TVA.  This lease arrangement changes neither the ownership of the property nor TVA revenues and so has no effect on the PILOT within Tennessee.

The Commission also reported that the management strategy laid out in TVA’s Integrated Resource Plan could affect the balance of PILOTs across the region.  Changes in the supply system called for by the plan, brought about in part as a response to economic factors and environmental mandates, include closing a number of old coal-fired generation plants, acquiring new natural gas plants, and expanding nuclear-powered facilities.  These changes could affect the PILOT if they involve a shift in value of power-producing property from one state to another.

Changes so far, including the change from coal to natural gas at the Rogersville plant, which was made as part of an agreement with the Environmental Protection Agency, have occurred mostly at existing sites and so have not affected the value of TVA property or the PILOTs.  The expansion of the Watts Bar nuclear operation now under construction in Rhea County could actually increase Tennessee’s share of the PILOTs if it increases the value of that property.  The closure of coal plants in Alabama and Kentucky announced this year and the opening of a new natural gas plant at an existing Kentucky site could also affect the payments across states.

The full report is available on the Commission’s web site at www.tn.gov/tacir/pubs_by_date.html


Study Shows 60 Percent Of Low-Income Tennesseans Face Civil Legal Problems

A study commissioned by the Tennessee Supreme Court Access to Justice Commission and the Tennessee Alliance for Legal Services with the support of the Tennessee Bar Association has found that more than 60 percent of vulnerable Tennesseans face a significant civil legal need. The goal of the study was to examine the effectiveness of delivering legal assistance to those in need. ... (click for more)

Honor Mohney Appointed Chamber Community Outreach Manager

The Chattanooga Area Chamber of Commerce announced today that Honor Mohney has been appointed Community Outreach manager, where her responsibilities include managing the chamber’s 12 area councils.   Chamber Councils bring business professionals together to support a specific geographic area within the community through networking opportunities, special events and ... (click for more)

2 People Critically Injured In North Chattanooga House Fire

For the second time in three days, a house fire has resulted in tragedy with two people critically injured in North Chattanooga. At 10:13 a.m. on Wednesday, Chattanooga firefighters were dispatched to a reported house fire with entrapment at 220 Houser St. The first firefighters on the scene saw flames shooting out windows and part of the roof. Having been told that people ... (click for more)

Kiser Post-Conviction Hearing To Resume April 6

A post-conviction hearing in which Marlon Duane Kiser is seeking a new trial in the 2001 slaying of Deputy Donald Bond will resume April 6. Attorneys for Kiser, who is on Death Row, said they have additional witnesses to call. Kiser on Tuesday took the witness stand for the first time, blaming the killing on the man he was living with at the time - Mike Chattin. Chattin, who ... (click for more)

Why Ferguson Matters In Chattanooga

The recent verdict in Ferguson has thrown race relations in the spotlight again. It is far too easy to get caught up in the debate as to who was right. But the plain fact is that the community lost, the police force lost and the nation lost. So why does Ferguson matter in Chattanooga? Because a police force mainly composed of whites got into a conflict with a community mainly ... (click for more)

Roy Exum: A Grand Thanksgiving Feast

I’m not really sure how it all came about but a few days before Thanksgiving last year, what was usually a crowded table had dwindled down to just Mother, Aunt Martha and me. Just the idea of getting dressed up made both of them tired, which happens when you are 89 and 87, respectively, and the thought of preparing the traditional feast brought only further groans so I announced ... (click for more)