Published 12:00 am Friday, July 20, 2012

‘Law is clear’ county may lose in bankruptcy

By Rupert Howell

Panola County may lose $30 million of its current tax base if the leading bidder for LSP Energy wins the auction to be held in New York August 13 — that equates to about $4.4 million in taxes.

Panola County’s tax consultant Bill Bryant said Thursday, “The law is pretty clear.”

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South Mississippi Electric Power Association (SMEPA) has entered into a purchase agreement in Federal Bankruptcy Court in Delaware, to buy all assets of LSP Energy for $249 million. It’s not yet a done deal.

SMEPA is the leading or “stalking horse” bidder for the gas-fired electric generating plant at Harmon Industrial Park in Batesville that filed Chapter 11 bankruptcy.

The Stalking Horse Bidder is a term used for the favored bidder after an initial round of bids.

Laws made early in the last century to enhance rural electrification gave the tax exemption to non-profit rural electric power associations, similar to TVEPA, the local power distributor.

But that law didn’t include municipal taxes which would mean the City of Batesville would still receive approximately $800,000 annually if the lead bidder is successful.

An auction scheduled August 13 in New York will allow remaining bidders an opportunity to outbid SMEPA to enhance the debtors’ position. Those bidders would not only have to match SMEPA’s bid, but best it in the range of millions with SMEPA having he opportunity to match the better bid.

 Ten bidders initially qualified to purchase the bankrupt facility according to court papers. Several bidders later withdrew from the sale process due to the assets’ values and difficult financial arrangements.

The sale is being watched closely by local authorities as approximately $4.4 million in local property taxes are in arrears.

Both Panola County and South Panola School District are each owed approximately $1.8 million and the City of Batesville’s is owed $800,000.

Should the transaction linger, a tax increase must be levied to pay South Panola School District the amount due from last year’s taxes while Panola County and the City of Batesville are also experiencing tax shortfalls for the current fiscal year due to unpaid taxes.

Bryant affirmed that those taxes, plus this year’s taxes will be paid with interest at the finalization of the power plant’s sale. The current year’s taxes would be pro-rated if a non-profit, rural association was the successful bidder.

Another concern is the approximately $350,000 paid to Panola Partnership in an agreement when the plant was originally located in Batesville. That money has been used mostly to build infrastructure and purchase property for industrial development which allows local authorities to “sweeten the pot” when competing to lure industrial prospects to the area. It stems from the state building a 10-inch water line from Enid Lake to the Batesville facility.

Not to be taken for granted is the local entity’s annual payroll of between $3.5-$4 million with 33 employees.

South Mississippi Electric Power Association and its 11 member distribution systems serve more than 410,000 homes and businesses in 56 of Mississippi’s 82 counties according to their website, the closest being Coahoma Electric Power Association.

SMEPA also has a 17.5-percent stake in the controversial Kemper County coal fired plant whose construction cost estimates recently reached $2.88 billion.