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CHARLESTON -- Members of the West Virginia Board of Public Works grilled one of the state's major telecom companies seeking a reduction in their total utility property tax assessments.
The Board of Public Works met Wednesday at the State Capitol Building to provide public utility companies an opportunity to address board members regarding the tentative assessed property tax values determined by the State Tax Department.
The Board of Public Works -- consisting of Gov. Jim Justice, Secretary of State Mac Warner, Attorney General Patrick Morrisey, Agriculture Commissioner Kent Leonhardt, State Auditor J.B. McCuskey, State Treasurer Riley Moore and State Superintendent of Schools Michelle Blatt - met in September to receive the tentative property tax assessments for tax year 2024.
While county commissions review property tax assessments for properties within counties, the Board of Public Works reviews property tax assessments from the state Tax Division of properties owned by major utility companies that span multiple counties. The final property tax assessments will be approved in January 2024.
According to the state Tax Division, the tentative assessed value of public service business property for tax year 2024 is more than $14.2 billion, a $957 million increase over the prior tax year final assessment of more than $13.2 billion, a 7.3% increase.
The Board of Public Works heard three appeals Wednesday, including an appeal by companies owned by Frontier Communications seeking a significant reduction in its assessment. Ryan Ivey, with Kroll LLC, said the tax assessment of $372.5 million for Frontier West Virginia Inc. and Citizens Telecom Co. of West Virginia was simply too much given the companies' financial situation and the shift from landlines to cell phones.
"They really have this legacy communications business that is declining," Ivey said to the board. "They have plans and hopes to replace and upgrade their systems and be viable into the future. But of course, those plans take time to construct, implement, and actually begin seeing the fruits of those modernizations."
Frontier Communications emerged from bankruptcy in 2022 after filing for Chapter 11 bankruptcy protections in April 2020, eliminating more than $10 billion in debt and reorganizing into a different company. According to Ivey, Frontier's revenue has decreased from $315 million in 2020 to $263 million this year with operating incomes declining into the negative.
"I think from the company's perspective, the decline in performance should perhaps be taken a bit more into account," Ivey said.
Last year's total assessment for both companies was $372.5 million. Ivey said their ideal assessment value would be between $300 million and $315 million for Frontier West Virginia and Citizens Telecom.
Meanwhile Frontier has received more than $370 million as of 2023 through the FCC's Rural Digital Opportunity Fund (RDOF). Frontier received another $70 million through the American Rescue Plan Act (ARPA). Frontier has largely shifted into high-speed broadband, upgrading many of its formerly copper telephone lines to fiber and advertising "1 Gig" internet speeds, or up to between 1,000 Mbps upload and download speeds.
Ivey was grilled by Board of Public Works members, who questioned how the companies' assets could be worth less while improving its assets through broadband expansion.
"It is a little strange to me in the current time that we're in, that any asset based on what is being valued by the Tax (Division) would be worth less now than it was in 2021. It's almost impossible," said McCuskey. "The whole idea of the utility is that you have access to pieces of property that enable you to deliver the service. The fiber is going on those pieces of property. And so they would be increasing the value of that property by virtue of laying fiber."
"There is nearly $400 million in taxpayer dollars that you've been allocated to put high-speed internet here in the State of West Virginia. I'd assume that would increase your assets," said Moore.
When the FCC first announced RDOF recipients in West Virginia, several state officials raised concerns about Frontier receiving so much funding given the company's issues nearly 15 years ago with internet expansion during the administration of former president Barack Obama.
"What I really don't get here is the fact that the federal government has pumped into your operations hundreds and hundreds and hundreds of millions dollars, and you should be making obscene profits," said Justice. "I don't mean this in a bad way, but either the company is questionably managed or you're heading to a situation where a lot of vendors could end up on a real short end of the stick. And if you're in danger, for God's sake of living, people need to know about it."
State Tax Commissioner Matt Irby said his office is reviewing the appeal from Frontier to determine if changes need to be made.
"We have a recognition that they've got a legacy business and they've got the new line of business that they have been investing heavily in," Irby said. "One of our primary approaches is to make sure that taxation is equal and uniform so that we're treating everybody fairly and appropriately with regard to the value of their property."