The NEXUS pipeline was completed in 2018 in parts of northeast Ohio amid much controversy and environmental concerns. One of the main selling points was that it would generate millions of dollars in tax revenue for public entities close to its path – primarily school districts.
But after years of calls and negotiations between NEXUS and state tax authorities over the true value of the pipeline, this windfall isn’t going quite as it was supposed to. Now a county auditor is taking action.
“It’s all my NEXUS stuff. It just keeps growing,” Lorain County Auditor Craig Snodgrass said with a laugh as he pointed to piles of paperwork in his office on a recent September morning.
Snodgrass is seeking clarification on a settlement earlier this year between the Ohio Tax Commission and pipeline companies NEXUS, Enbridge and DTE Energy.
Schools and other public entities, including libraries and municipal governments, receive tax revenue when utilities such as pipelines are built nearby. When the NEXUS pipeline was completed in 2018, the state tax commission pegged the value of the pipeline at $1.4 billion statewide.
Spread across the 13 counties the pipeline passes through, that meant some school districts — including those in Lorain, Medina, Stark and Summit — would receive millions of dollars each year.
But NEXUS has appealed the state’s valuation several times over several years, challenging the true value of the pipe. During this time, he paid the schools about 40% of the assessment.
The state ordered an appraisal and settled with NEXUS at the end of June this year, reappraising the pipeline for $950 million, or about 58% of the original appraisal.
It didn’t quite seem fair to Snodgrass.
Snodgrass appealed the settlement in September to give it more time to request documents and try to better understand how they reached that agreement, he said.
“Hopefully we can get information that we weren’t allowed to get otherwise, or weren’t allowed to get, and hopefully find, you know, what’s the right number?” You know, at least to get a level of comfort,” he said. “But until we actually get those documents, it’s just been spinning in the dark.”
Snodgrass has hired third-party consultants to help review all appraisals and the final state valuation.
If they find enough evidence to support Snodgrass’ suspicion that the pipeline is worth more, they will present their case to the tax appeals board.
If successful, school districts could come close to the revenue originally promised.
Taxpayers, school districts lose the most
During the years-long appeal process, NEXUS paid schools and other public entities 40% of the original assessment, which it was legally allowed to do. When the state and NEXUS reached an agreement, NEXUS owed the schools the difference.
School districts would still receive only a portion of the tax revenue they originally expected.
The Oberlin City School District in Lorain County was supposed to receive nearly $2 million a year, and as part of the June settlement, that amount was cut nearly in half — to $1.1 million dollars, Snodgrass said. Oberlin and other districts had planned to use NEXUS funds to construct new school buildings.
Taxpayers are ultimately the hardest hit, Snodgrass said.
“[School districts are] anticipating that income, which would reduce the burden on owners, taxpayers,” he said. “So now if that money doesn’t come in… You still have the need, but now you have to get that income from somewhere . So instead of getting where you thought it came from, you’re going to have to, you know, ask the taxpayers for it.
In Medina County, Cloverleaf Schools had a lot at stake. They were originally supposed to receive about $7.4 million in 2019 from NEXUS, and that dropped to $4.3 million.
Cloverleaf Superintendent Daryl Kubilus said projected NEXUS revenue is giving the district the push it needs to finally build new school buildings. The current buildings are old and in need of major upgrades, but the district had been in a budget emergency for some time and lacked the funds for new construction, he said.
Cloverleaf is using NEXUS funds to construct a new joint building for middle school and high school.
“It’s still a godsend for us because we wouldn’t be building the school today if it wasn’t for those NEXUS proceeds,” Kubilus said.
However, school officials will likely have to go to voters to ask for operating funds now, due to declining NEXUS revenue, he added.
“Little did we know they were looking for just over a third of the same numbers they were running as a reason for us to be excited about them,” Kubilus said.
In a statement, NEXUS spokesman Adam Parker told Ideastream Public Media that “market conditions and other factors” have altered the value of the pipe.
The impact of the settlement has rocked school districts across the state.
Cajon Keeton is school treasurer and a key member of the Ohio School Pipeline Coalition, a group of school officials from districts receiving NEXUS funds. The group met regularly to discuss ongoing appeals.
The pipeline brought hope to many impoverished school districts across the state, and the subsequent appeals and eventual settlement were disheartening, Keeton said.
“For a lot of these communities, it was the first time they were able to provide some of the things that they were providing through the pipeline,” Keeton said. “And just for that to be devalued, I think that was kind of a punch in the gut for those schools.”
Keeton agreed with Lorain County Auditor Craig Snodgrass that ratepayers will feel the impact the most.
“School districts were going to be able to cut taxes with this, and it’s not going to happen, on the impact that it was originally going to happen,” Keeton said.
NEXUS owes schools – but how much?
Before Snodgrass appealed the settlement, school officials finally knew the exact funds they were receiving after years of not being able to budget accurately, Cloverleaf’s Kubilus said. The call put the schools back in the dark.
Kubilus does not know whether NEXUS will pay the rate that was decided in the 2022 settlement, or revert to the lower amount, Kubilus said.
In a statement, a spokesperson for the Ohio Tax Commission said utility values are “confidential” and that utilities “have the ability to pay only that portion of the bill that the utility does not. don’t argue”.
When Ideastream asked if that meant NEXUS would pay 40% instead of 58%, the spokesperson declined to comment.
Kubilus said Cloverleaf has made several contingency plans to prepare for this.
“I will have to wait for NEXUS to make its payment to understand what we will actually receive. It’s not a very good position,” Kubilus said.
Keeton added that Kubilus’ relief that there was a settlement — even though schools were getting less money — was shared by other school officials from the Ohio School Pipeline Coalition.
“I think the majority of treasurers would just prefer, I’m going to be honest, to take the [58% rate] and trade that in for consistency, so they can keep budgeting for the next five years,” Keeton said.
Lorain County Auditor Craig Snodgrass understands why some school officials and county auditors might be frustrated by his appeal and the disruption he could also cause in this year’s tax payments, he said. .
But he feels he owes it to the taxpayers of his county to get to the bottom of things.
“Some said – ‘you should have taken the case.’ It’s my county, though. I don’t work for other counties,” Snodgrass said. “I think I would like to see more information to make sure I can tell the county, the people of this county, whether it was good or not.”
The state will soon provide a timeline for the appeal process. In the meantime, Snodgrass is starting to work with the consultants to comb through all the documents.
In a statement, Adam Parker said NEXUS has contacted Snodgrass attorneys to file a joint dismissal of the appeals. Snodgrass does not plan to accept this offer.