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HANOVERTON -- Even under the worst case scenario of tax appeals by the Nexus pipeline, the United Local School District will still generate enough revenue to fund its proposed building project.
Mike Burns, lead investment banker for Ohio issuers at Baird, this week provided the school board an update on the building project, a pre-K-12 campus for which the district has secured funding from the Ohio Facilities Construction Commission (OFCC) to add to estimated tax collection from the pipeline. The school board is participating in the OFCC's Expedited Local Partnership Program (ELPP), which allows the district to move forward with its building project by starting with the local share.
Burns reported even in the worst case scenario in which the current Nexus pipeline tax appeal succeeds, resulting in the district collecting on only 39 percent of the pipeline's original value, the district will still be able to afford its payments on a 30-year loan for its $27.47 million local share of the project. Additionally, the district will still be able to build payment and capital improvement reserves for the first 10 years before the revenue and payments even out.
The original value of the Nexus pipeline is $170 million, which would have generated $4.068 million in 2020.
Burns said Nexus has appealed the valuation three times, all rejected outright by the Ohio Department of Taxation, and has a fourth appeal on the books seeking a value of $65 million-- which is 39 percent of the original value. Under the fourth appeal, the district generated $2.39 million in 2020, $500,000 of which school Treasurer Melissa Baker has held back in case the appeal is successful. If the appeal fails, Nexus will have to pay the back taxes of the original amount plus interest, Burns said.
If the appeal is rejected again, Nexus can take the issue to court, but is not likely to win because the Ohio Department of Taxation has not done anything illegal in rejecting the appeals, Burns noted.
In the event Nexus declares bankruptcy, Burns said the district will rely on the payment and capital improvement reserves to buy some time to communicate with the community for a permanent improvement levy or move inside millage, or hope for a sale of the pipeline, which would cover back taxes and continue future payments.
"As with every loan, there is a risk," he said. "It's out of our control."
khowell@salemnews.net