Public Education Matters

Intro 0:07
This is Education Matters, brought to you by the Ohio Education Association.

Katie Olmsted 0:15
Thanks for joining us for this edition of Education Matters. I'm your host, Katie Olmsted, and every week I take you on a deeper dive into some of the biggest issues facing our schools here in Ohio. In this episode, I want to talk about a really exciting topic: property tax valuations for public utilities. Okay, Now hear me out on this one. This may sound like a bit of a snooze fest, but it's actually a huge deal when it comes to funding for local schools. And there is an ongoing saga around the NEXUS pipeline that has really created a lot of chaos. That NEXUS pipeline goes through more than a dozen counties in Ohio, and impacts tons of school districts all along its path. And when proponents of the pipeline were trying to sell communities on the project, there were big upsides, at least school funding wise, for having the pipeline come through town, Buckeye Local schools, for instance, were supposed to get $2.2 million a year in property tax revenue from this pipeline. Oberlin City Schools were supposed to get $1.9 million in 2019 from this. Cloverleaf local schools were going to get a whopping $7.4 million in property taxes from the NEXUS pipeline that same year. And those are just a few examples. But after the pipeline was finished in 2018, and the state tax commissioner set the value of it at $1.4 billion statewide, NEXUS appealed the valuation. And that left all of the districts with just 40% of the promised funding, for years, while the appeal was going through the courts. Eventually, there was a settlement with the pipeline companies paying just shy of 60% of what they were originally going to pay in the property taxes for this pipeline. And then the Lorain County Auditor appealed that figure. So once again, the amount school districts will get from this pipeline is back in the air. The Sandusky Register reported that has prompted the Edison district to postpone a new building proposal because there are just too many questions about how much pipeline money they will ultimately get. And that's to say nothing of the questions this is leaving for taxpayers along the rest of the pipeline, too. Anna Huntsman has been asking a lot of those questions. She is a reporter for Ideastream, the National Public Radio affiliate for the Cleveland, Akron, and Northeast Ohio areas. And from about mid-August to mid-September, she went looking for the answers for a radio story she put together really breaking down the situation. We invited Anna to join us for this podcast, to help make sense of all of it.

Katie Olmsted 3:01
Anna, thank you so much for sitting down with us. When we talk about things like property valuations, I think a lot of people's eyes glaze over. So seeing your reporting on this and hearing your story on it, I think you've done sort of a magical job of explaining this in a way that a lot of people can understand. And I'm hoping we can really tap into that expertise. So first off, thank you for sitting down with us. But second off, I do want to reiterate that you are sharing your experience reporting, this is not your stance on any of this. This is not your personal opinion. This is just what you've uncovered in your reporting. Is that correct?

Anna Huntsman 3:37
Exactly. Yes. Thank you so much. I'm glad that it was a somewhat easier read. It was definitely difficult to report and lots of conversations with county auditors, lots of doing math. So it's definitely a complex topic. But I'm happy to be here to share what I learned.

Katie Olmsted 3:55
So let's talk the big big picture. What in the world is going on?

Anna Huntsman 4:02
Okay, well, lots is going on in the world. But specifically, with the NEXUS pipeline drama - I say drama, but it's just been kind of this ongoing process for the last few years. So essentially, there's a natural gas pipeline called NEXUS. it goes through Ohio into Michigan transporting natural gas. And when a public utility like a pipeline is constructed, nearby school districts, municipalities, libraries get a portion of funding and tax revenue from that pipeline because public utilities are taxable. So the NEXUS pipeline in the initial planning stages, I interpreted it as a big selling point for the pipeline, was that it would bring lots of money to specifically school districts. So I mean, initial projections, we're looking at millions of dollars in some cases and some compressor stations would be built by schools and that would give you give them even more money, essentially. And I say it was a selling point. I mean, that was something I asked school officials about. And they agreed with my analysis of it really seemed like this is one of the reasons they were really trying to get the pipeline constructed. There were lots of environmental concerns at the time, people were forming coalitions speaking out against the pipeline. But like I said, one of the biggest positives per se, was that it would bring in a lot of money. So the pipeline goes in, and the state tax commission, the Tax Commissioner puts a valuation on the pipe, and schools get their projected revenues. So the companies that operate the NEXUS pipeline, Enbridge and DTE Energy almost immediately appealed the state's valuation. They appealed multiple times, eventually appealing at like a rate of like, only 40% of what the state said the pipeline was initially worth. And so throughout this appeals process, as the state tax commissioner was looking into this, the pipeline companies were allowed to pay schools at the rate that they said, so they were allowed to pay at 40% of the initial valuation. So needless to say, schools got a lot less or were projected to get a lot less than they were initially expecting. And essentially, where we stand now, earlier this summer, the state tax commissioner finished the appeal. They finished the negotiations with NEXUS and they settled at about a rate of 58%. So almost cut in half, essentially, these revenues that school districts were expecting, as well as the municipalities and and other entities, not just schools, but this story focuses on schools. And, again, where we stand now, the counties where the pipeline went through, so I think it's 14 counties, the county auditors were allowed to they got like, I think like 60 days to appeal and almost all of them chose not to because through my interviews, what I was hearing is that school officials were just relieved to finally have an answer. They could finally accurately budget, even though it was 58%. They finally knew something after years of being in limbo. But one county auditor the Lorain County Auditor, Craig Snodgrass, decided to appeal because he just really felt like it was unfair. And that, you know, the schools in his county, the municipalities were not getting what they should have been getting. And he wants to kind of like learn some more information about where they got those numbers. And what all went into this. So that is where it stands now. He's in the appeals process. But the problem is, because he appealed schools don't have an answer anymore. They're in the dark about what they're actually going to get. So they thought it was 58%. Now they don't know, as far as I'm aware. So that, you said big picture. That's pretty much the whole summary of what I've learned. Well,

Katie Olmsted 8:04
A couple of things to nail down within all of that. My understanding is that while this new appeal is going on, they're back to that 40% valuation. Is that true?

Anna Huntsman 8:16
I do not know. Nobody knows the what they're going to get this year from NEXUS. It could that is a concern that it could go back to that 40%. That's something I heard from the superintendent of Cloverleaf schools, which is in Medina County, that Luckily for them, they budgeted well enough that it doesn't impact them too much. But they were like, We don't know what to budget. We don't know if we're gonna get that smaller amount this time around. And so yes, I did hear of some school districts like a school district in Sandusky, the Sandusky area having to postpone a project because they were going to use these funds for that. And so now they're back in limbo. So, and I did hear from the Lorain County Auditor Craig Snodgrass who said that other county auditors were telling him, man, you should have taken the deal, you should have done this, you know, this kind of messes up other plans. But he was like, I don't work for other counties. I mean, that's something he literally said to me is I don't work for the counties.

Katie Olmsted 9:18
And really what I was hearing from him and your story is that he's just asking for transparency and for answers. And that's my big question. If the companies who are running this pipeline are saying that their tax valuation is actually 40% of what was originally projected, why? What accounts for that huge difference in the numbers?

Anna Huntsman 9:39
Those are the exact questions that Snodgrass is asking, How did you get there? I mean, there's piles and piles of paperwork. I saw it myself on his desk. He was saying that there hasn't been a lot of transparency throughout the process. And I reached out to the Ohio Department of Taxation, who told me that values for public utilities are confidential and the utilities have the ability to pay only the portion of the bill that the utility does not dispute. So what that tells me is okay, so are they going to pay that 40%? And I asked them about that. And they declined to comment. So they're keeping it, you know, it's not super transparent, at least from my perspective. But yeah, so that's exactly what Snodgrass wants is to - He hired some outside investigators to look into this with him. And they're going to see how they got to those numbers and those percentages throughout these negotiations and see, if he finds evidence that he thinks it was wrong, he's going to go through an appeals process.

Katie Olmsted 10:36
So let's talk the real dollar numbers here. I mean, we're talking a ton of different school districts that had one number sort of promised to them, and then they got 40% of that. Do you have any of those numbers right in front of you that we can share?

Anna Huntsman 10:52
Sure. I mean, the biggest example that I talked about in my story is Cloverleaf Schools. I just mentioned their superintendent, they were going to get a lot. They were one of the biggest beneficiaries of this because they had a compressor station near them. So they were initially supposed to get about 7.4 million in 2019. $7 million. This is a school district that had been in fiscal emergency, like a decade ago, I think, had to constantly go to the voters for levies to get out of that. Had big plans. They haven't gotten new buildings since the 60s. So 7.4 million in just the first year, and then it decreases a little bit each year. But that's ballpark. Now that's dropped to 4.3 million. So

Katie Olmsted 11:37
yeah, still a good chunk of change. But it's not what they were originally sold. And that not what they were originally planning on when this was all moving through.

Anna Huntsman 11:47
Yes, exactly. So I mean, it's a significant decrease, as you mentioned, still a lot of money. Luckily, they are still able to build a new school. But it impacts their operating revenue, and they will probably have to go to the voters again. That's what the superintendent told me, which, as you know, what I'm sure the listeners of this podcast know is often tricky. And voters get levy fatigue, and not, you know, especially if they have been told we don't have to ask you for money anymore because of these funds that we're getting, which is something I heard from a lot of the school officials I talked to, they were saying this was a huge relief for a lot of us school districts, because we don't have to go to the voters for this big project that we've been wanting. And now boom, we're not getting as much as we thought. We will likely have to go to the taxpayers.

Katie Olmsted 12:42
Yeah, well, I'm sidetracking here, because it really does speak to Ohio School funding system as that big picture as well. So as we know, Ohio School funding system has been declared unconstitutional about a billion and a half times, because among other things, it is really over reliant on local property taxes to pay for our schools. And so the Fair School Funding Plan, which was passed in the last state budget, was supposed to address this. It takes into account how much it actually costs to educate a child. And it takes into account how much community can actually afford to pay towards educating a child to determine what the state should be contributing to that district. Do you know if when they were coming up with what the state was paying for some of these districts that are affected by the pipeline, were they talking about the property tax valuations on the pipeline have 100%? Or that 40% figure?

Anna Huntsman 13:41
I do not know the answer to that question. That is a really good question. Yeah, I'm sorry. That's not something I came across in my reporting.

Katie Olmsted 13:48
I mean, there's certainly a lot of questions still about what's going on with this pipeline, what's going to happen with it. But I want to talk a little bit more about your experience learning about this. What was your general sense when you were talking to the superintendents? What was their, their emotional state when they're dealing with this ongoing saga?

Anna Huntsman 14:06
That's a really good question. I'm putting myself back in my September, August shoes. And when I was doing this reporting, because I did get a sense of frustration from a lot of the school officials I talked to. Now, in Cloverleaf's case. Like I said, they're still getting a lot of money. So they were still pretty grateful. But I think the exact quote that was told to me is you know, "little did we know that this whole time, NEXUS was promoting this pipeline to us they were going to actually only say it was worth a third of it." You know, that kind of sarcastic frustration. I talked to some school officials who were members of this Ohio School pipeline coalition group. So it was a group of treasurer superintendents who kind of like banded together to keep each other in a loop during this whole process. And they were sharing some stories from school districts, I think in the southeast portion of Ohio, which is a pretty impoverished region and a lot of schools out there are very underfunded. And they were talking about how this was the first time some school districts had money to work with. And they could get stuff done that they had been postponing for years or had been wanting for years. And it was just a, I think they said a punch in the gut to those school districts to learn all this. And of course, the caveat here is a lot of the auditors were like, 'I told my districts don't budget for this until you know, for sure what you're getting.' But on the other hand, I think one of the school officials told me, like, 'I understand, if a school didn't have money for a long time, and now gets it, they're gonna want to use it.' So definitely a sense of frustration from everybody. The auditors were more of the mindset of like, yeah, we tell people, you know, don't don't budget, you know, this happens all the time. You know, every time anything goes in, they're going to they're going to try to get the valuation down. But on the school side, it was you can tell they were disappointed.

Katie Olmsted 16:02
Did you get anything from the companies that run the pipelines? Were they willing to talk to you?

Anna Huntsman 16:09
They didn't want to talk. They sent statements, which was not like totally unexpected, but um, they kind of just had the the spokesperson for NEXUS kind of had the, you know, basic statement of, We've tried to make this work. We've tried to negotiate with the state, we think this is a fair settlement. And we're, I don't remember the exact wording, but something about like kind of being disappointed that the Lorain County Auditor appealed. Just basically given me the, you know, we tried to be fair type of thing.

Katie Olmsted 16:38
The statement one may probably expect in that sort of situation.

Anna Huntsman 16:42
Exactly. Sure. Yeah.

Katie Olmsted 16:44
Did you find anything unexpected in your reporting on this?

Anna Huntsman 16:47
Well, it was a lot of talking to auditors, a lot of math. Oh, that is certainly not my forte. I do remember though, there was one point where I was gathering, I requested a lot of data from from the counties near my reporting. So Northeast Ohio counties. And I was putting them in a graph. And when you just see the raw numbers, and you see the bars on the graph, the half, you know, you see that second bar being half of the first one, it really just put it in perspective to me. I mean, it was like, wow, this is I've been kind of in the weeds reporting this, and then you look at it, and you're like, Wow, it really was like half of what they were initially expected. I mean, 58%. But you know what I mean, just to kind of see that visual was not necessarily unexpected, but that's really what put it for me, like, wow.

Katie Olmsted 17:38
And when I saw those bars, I sort of took it one step further, and I just kind of imagined your dreams for that district are now half of what they could have been, and the things that you could have done with that money are now half of what they could have been. And now it's who even knows because the saga continues.

Anna Huntsman 17:58
Right. And of course, we keep talking about the school districts and all of the things, you know, new buildings, etc, that they wanted, but something that, again, kind of was a, an eye opening moment for me was during one of my conversations with one of the auditors at some point where he was like, it's the taxpayers. I mean, yes, the schools are impacted a lot. But when you think about the individual taxpayers, they are the ones who are going to be affected the most, because the schools are going to go back asking for more money. And so it's like the taxpayers. In some cases, depending on where they live, maybe they were against the pipeline from the beginning. As I mentioned, there were a lot of concerns when it first went in. So it's like this pipeline goes in, you didn't want it near your property. And then your school district, your local school district isn't getting as much money as they thought they thought they could do these projects. Now they have to ask you for money. And it's just really that the taxpayers are the ones impacted the most at the end of the day.

Katie Olmsted 18:59
And I feel like with this whole story, if you're one of the taxpayers, or one of the people who lives here and has the environmental concerns, and you're right along the pipeline, this is in your face every day, you know this story. But if you're not in that affected area, maybe this is something that's not on your radar. What would you tell somebody who doesn't live there about why does this story matters?

Anna Huntsman 19:22
Well, I think it matters. Yeah, sure. It's just 14 counties, just 14, out of Ohio's 88 or something. But obviously, this is a big deal for those areas. But also, this is not the only pipeline. There's also the rover pipeline, which I think goes in other areas, not - it intersects a little bit with Nexus, but not all the way. That's in a bunch of appeals. I mean, it's the same thing. And so I guess, just for anybody, I mean, this is going to probably affect you at some point with some sort of public utility, or some sort of similar situation, I guess. I mean, I don't know that I guess that's a question like What do you think about that?

Katie Olmsted 20:02
Well, I have always on my hat of "Is this right? Is this wrong?: And I know you can't weigh in on whether it's right or wrong. But I have my How Totally Unfair Is This hat on thinking about those school districts especially. And if it's not, this is if it's not your school district today, it is your school district tomorrow. And it is a sign of the problems with our state school funding system, that this specific pipeline was going to be a godsend to school districts, that it absolutely was going to solve the problems that were created by an unfair school funding system. So on many levels, I have the privilege of saying, This is wrong. This is wrong on many levels. And I know you can't say that. But I appreciate all of your reporting that allowed me to better understand the situation so that I could form my own opinion about it. So thank you, Anna.

Anna Huntsman 20:55
Oh, my gosh, thank you so much. I am not an expert on school funding. I know that's a huge piece of this, though. So I'm glad you were able to fill in that context, too. Because I know I mean, it is a big deal. And that's not an opinion. It is a big deal for a lot of schools. So yeah, thanks for giving me the time to share my recording.

Katie Olmsted 21:16
Of course, you can find the link to Anna's full story in the show notes for this episode, because the Sandusky Register article about Edison schools is there, too. And while you're clicking around on that page, take a second and subscribe to Education Matters so you don't miss a conversation in the future. If you have thoughts on what you'd like to hear on this podcast, please email me at EducationMatters@ohea.org. Until next time, stay well.

Transcribed by https://otter.ai