The NEXUS natural gas pipeline was completed in 2018 across 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 near its path - primarily, school districts.
But after years of appeals and negotiations between NEXUS and the state's tax officials about how much the pipeline is actually worth, that windfall isn’t panning out exactly the way it was supposed to. Now, one county auditor is taking action.
“This is all my NEXUS stuff. It keeps growing,” Lorain County Auditor Craig Snodgrass said, chuckling, as he pointed out piles of paperwork in his office on a recent September morning.
Snodgrass is trying to get clarification on a settlement earlier this year between Ohio’s department of taxation and the companies that operate the NEXUS pipeline, Enbridge and DTE Energy.
Schools and other public entities, including libraries and municipal governments, receive tax revenue when utilities like pipelines are constructed nearby. When the NEXUS pipeline was completed in 2018, the state tax commissioner set the value of the pipeline at $1.4 billion statewide.
Broken down across the 13 counties the pipeline runs through, that meant some school districts – including ones in Lorain, Medina, Stark and Summit – would receive millions of dollars each year.
But NEXUS appealed the state’s valuation multiple times over the course of several years, disputing how much the pipe was actually worth. During that time, it paid schools just about 40% of the valuation.
The state ordered an appraisal and settled with NEXUS in late June of this year, revaluing the pipeline for $950 million - about 58% of the initial valuation.
That didn’t seem quite right to Snodgrass.
Snodgrass appealed the settlement in September to give him more time to request documents and try to better understand how they got to that agreement, he said.
“Hopefully we're going to be able to obtain some information that we otherwise weren't allowed to get, or {were} prohibited from getting, and hopefully come up with, you know, what is the right number? You know, at least to get a comfort level,” he said. “But until we actually get those documents, it's just shooting in the dark.”
Snodgrass hired third-party consultants to help him look into all of the appraisals and the state’s final valuation.
If they find enough evidence to support Snodgrass’s suspicion that the pipeline is worth more, they’ll present their argument to the board of tax appeals.
If they are successful, school districts could get closer to the revenues they were initially promised.
Taxpayers, school districts lose the most
During the years-long appeals process, NEXUS paid schools and other public entities 40% of the initial valuation, which it was legally permitted to do. When the state and NEXUS came to an agreement, NEXUS owed schools the difference.
School districts would still receive only a portion of the tax revenue they initially expected.
The Oberlin City School District in Lorain County was supposed to get nearly $2 million per year, and under the June settlement, that was cut almost in half - down to $1.1 million, Snodgrass said. Oberlin and other districts had planned to use NEXUS funds to construct new school buildings.
Taxpayers are ultimately impacted most, Snodgrass said.
“[School districts are] anticipating this revenue, so that would lessen the burden on the homeowners, on the taxpayers," he said. "So now, if that money doesn't come in … You still have the need, but now you have to get that revenue from somewhere. So instead of getting where you thought it was coming from, you're going to have to, you know, ask ask the taxpayers for that.”
In Medina County, Cloverleaf Schools had a lot at stake. They were initially supposed to receive about $7.4 million in 2019 from NEXUS, and that dropped to $4.3 million.
Cloverleaf superintendent Daryl Kubilus said the projected revenue from NEXUS gave the district the push it needed to finally construct new school buildings. The current buildings are old and in need of significant improvements, but the district was in fiscal emergency for some time and didn’t have the funds for new construction, he said.
Cloverleaf is using the NEXUS funds to build a new joint middle and high school building.
“It's still somewhat of a windfall for us because we would not be building the school today if it weren't for these proceeds from NEXUS,” Kubilus said.
However, school officials will likely have to go to the voters to ask for operating funds now, due to the drop in NEXUS revenue, he added.
“Little did we know that they were seeking a little over one-third of the same numbers that they were broadcasting as a reason for us to be excited about them,” Kubilus said.
In a statement, NEXUS spokesperson Adam Parker told Ideastream Public Media that “market conditions and other factors” changed the value of the pipe.
The impact of the settlement rocked school districts statewide.
Cajon Keeton is a school treasurer and a key member of the Ohio School Pipeline Coalition, a group of school officials from districts getting NEXUS funds. The group met regularly to discuss the ongoing appeals.
The pipeline brought hope to many impoverished school districts throughout the state, and the subsequent appeals and eventual settlement were discouraging, Keeton said.
“For a lot of these communities, this was the first time that they were able to provide some of the things they've been providing because of the pipeline,” Keeton said. “And just to have that devalued, I think was a kind of punch in the gut to those schools.”
Keeton agreed with Lorain County Auditor Craig Snodgrass that taxpayers will feel the impact the most.
“School districts were going to be able to reduce taxes with this, and that is not going to happen, to the impact that it was going to happen originally,” Keeton said.
NEXUS owes schools – but how much?
Before Snodgrass appealed the settlement, school officials finally knew the exact funds they were getting after years of not being able to accurately budget, Kubilus at Cloverleaf said. The appeal put schools back in the dark.
Kubilus is not sure whether NEXUS will pay at the rate that was decided in the 2022 settlement, or if they will revert back to the lesser amount, Kubilus said.
In a statement, a spokesperson for the Ohio Department of Taxation said 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.”
When Ideastream asked if that means NEXUS will pay 40% instead of 58%, the spokesperson declined to comment.
Kubilus said Cloverleaf has come up with several contingency plans to prepare for this.
“I'm going to have to wait until NEXUS makes its payment to understand what it is we're actually going to receive. That's not a very good position to be in,” Kubilus said.
Keeton added that Kubilus’s relief that there was a settlement – even though schools were getting less money – was shared by other school officials in the Ohio School Pipeline Coalition.
“I think that the majority of treasurers would rather just, I'll be honest, take the [58% rate] and trade that for the consistency, so that they can get going on with their budget 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 it could also cause in this year’s tax payments, he said.
But, he feels like he owes it to the taxpayers in his county to get to the bottom of it.
“Some said – ‘you should’ve taken the deal.’ That’s my county, though. I don't work for other counties,” Snodgrass said. “I believe that I'd like to see more information to make sure I can tell the county, the residents in this county, that this was good or not.”
The state will soon provide a time frame for the appeals process. In the meantime, Snodgrass is starting to work with the consultants on combing through all the documents.
In a statement, Adam Parker said NEXUS reached out to Snodgrass’s attorneys to file a joint dismissal of appeals. Snodgrass does not plan to take them up on that offer.
