The timing of the personal property tax liability of the Griffith Energy Project off Interstate 40 southwest of Kingman could depend on the definition of "commercial service" in recently enacted legislation, a state official said.
Bill Inman, corporate counsel to Arizona Department of Revenue Director Mark Killian, said merchant power plants coming online in Arizona are taxable when they are placed in commercial service under HB-2324.
Merchants plants are owned by independent companies that do not market electricity directly to consumers.
"The law does not define the term with much clarity," Inman said.
"In the old days it was turnkey without the commercial service terminology."
Inman said the department is doing "homework" while waiting to see what direction Griffith Energy takes when filing Jan.
1 and in April.
The Department of Revenue would have reason to follow up at that time.
Inman said state and Griffith officials are discussing the matter.
"We are aware of the cash flow problems Mohave County would experience and have reason to believe the (power) company is concerned with the needs of the county," Inman said.
Duke Energy North America of Houston and PPL Global of Fairfax, Va., jointly operate the natural gas-fired plant.
He said he believes that Griffith would try to work something out with the county.
Power plants, mines, gas lines and public utilities are valued centrally by the Arizona Department of Revenue under legislative definitions.
Griffith lobbyist Stan Barnes said the company does not consider the power plant in "commercial operation" during 2001 and would file tax documents on that basis.
District 1 County Supervisors Pete Byers said Griffith should pay the estimated $2.5 million in taxes to the county.
More than $350,000 of that goes to the general fund, which pays for a variety of county departments.
Merchant plants that sell only wholesale power are not under jurisdiction of the Arizona Corporation Commission and fall instead under federal regulations, Inman said.
ACC spokesperson Heather Murphy said the ACC has no operational oversight of power plants after approving them.
HB- 2324 attempts to fill in the gaps for the state, Inman said.
"(House Bill 2324) muddied the waters," Inman said.
"It covered some things already covered in other statutes and left some terms undefined."
Department of Revenue officials are discussing changes in the law with the governor's office and the state Legislature.
HB-2324 was a "sloppy" piece of legislation that changed some definitions and could lower the tax rate and decrease the years the plant is on the tax roll to as few as five to seven years, said Henry Varga, a board member of the Mohave County Economic Development Authority.
Varga, a certified public accountant, said lowering the taxable life of a plant expected to last more than 40 years to fewer than seven years would be costly to Mohave County and not logical.
"It was our understanding at MCEDA that Griffith would pick up all the cost of water and road construction if the personal property tax rate would be reduced," Varga said.
County Manager Ron Walker said county government would break even on the infrastructure after 14 years of collecting Griffith taxes.
The county borrowed $4.9 million from outside sources and $1.5 million from the landfill fund to pay for the water and roads.
MCEDA board President Bert Berschauer said the board brought the Griffith Energy tax issue to the attention of the Department of Revenue to get some action before year-end deadlines are passed.