Letter: Counties keep a wary eye on pipeline valuation decision
For county governments already overloaded with budget-busting public safety, transportation and community health concerns, a new set of storm clouds gathering on the horizon is not good news.
Through no fault of their own, 13 northern Minnesota counties find themselves on the sidelines looking in on an Enbridge tax court challenge over five years of elevated valuations that utility representatives attribute to a Minnesota Department of Revenue rule change.
Arguments concluded last October in a case seeking relief for tax years 2012 to 2014, during which Enbridge says it was over-charged $18 million in property tax revenue on an oil pipeline that bisects the state from Kittson
County in the northwest to Carlton County in the northeast.
The company argues it is owed an additional $32 million in another case covering 2015 and 2016, and has announced it will appeal its 2017 taxes as well.
A negative ruling for the state means the Enbridge counties — that include
counties with some of the smallest tax bases and highest social service costs in the state—may potentially be on the hook to repay $50 million in tax revenue that was already certified, collected, and long-ago disbursed.
And this case may just be the start as every other county in the state is
watching intently because a favorable ruling for Enbridge on oil pipelines
will open the floodgates for gas and transmission utilities to make similar
repayment claims. Railroads have already signaled they will challenge.
The payback numbers on the Enbridge challenge would be significant to each of the affected counties—and staggering to several.
Tiny Red Lake county's potential payback is estimated at $4 million, which
is more than $1 million higher than its total current annual operating
levy. Clearwater County would also owe more than it's entire annual levy.
It is important to note, counties don't set the valuations on pipelines or
other utilities — that's the state's responsibility. And counties can't anticipate and don't budget for court-ordered payback on multiple years of disputed property tax rates.
As county leaders, we find it difficult and frustrating to be in a situation
where we didn't set the rates that are now being challenged, yet our
taxpayers will likely be asked to shoulder much if not all of the burden of
We are watching developments in this case closely, and we are in close
contact with our legislators. For now, we are waiting for the initial ruling
on the 2012-2014 years, which is expected any day, and preparing the best we can to weather whatever those storm clouds bring.—Paul Gerde, Glenwood
(Gerde is a Pope County commissioner and chairman of Minnesota Rural Counties, a 29-member advocacy organization working on behalf of Greater Minnesota counties)