Amicus Brief

New Covert Generating Co, LLC v Covert Township at COA

Case Year: 2014
Case Forum: Michigan Court of Appeals
Keywords: true cash value, Michigan Tax Tribunal (MTT), functional obsolescence, economic obsolescence
Amicus Counsel:

Robert F. Rhoades (P28160) | Dickinson Wright, PLLC | 500 Woodward Ave Suite 4000 | Detroit, MI 48226-3425 | 313-223-3046

Jack L. Van Coevering (P40874) | Crystal L. Morgan (P68837) |
Bloom, Sluggett Morgan, PC | 15 Ionia Avenue SW, Ste 640 |
Grand Rapids, MI 49503 | 616-965-9340

CoAmicus Parties:

1. The City of Zeeland
2. The City of Marquette,
3. Michigan State Public Corporation Law Section (PCLS)


Newly discovered evidence that Consumers Energy planned to build a new plant for $750 and that NCG offered to sell its plant for that amount should have been considered. The test of MCR 2.612(c)(i)(b) is whether the new information was discoverable with due diligence; no lack of due diligence was demonstrated, and the explanation for the timing of the discovery is entirely reasonable.
Whether a particular index actually measures a particular type of
obsolescence is a question of appraisal principles which the Court of Appeals should address. External obsolescence is inappropriate in the cost approach, absent a finding
that the property represented by cost new, would not be constructed new without a subsidy and evidence that businesses’ profit margins are lower as of the valuation date than in some other year and other business valuation
indices do not establish that important point.
Statutes are to be applied as plainly written absent an ambiguity, and MCL 20S.73S(4 )(b) precludes Tribunal jurisdiction in this appeal of industrial personal property unless” a statement of assessable property is [was] filed under section 19 of the general property tax act, 1893 P A 206, MCL 211.19, prior to the commencement of the board of review for the tax year involved.” The mere appearance at the LBOR, without meeting a prerequisites for such a LBOR appeal does not constitute an appeal.


Court of Appeals affirmed the lower courts decision
On order of the Court, the application for leave to appeal the August 4, 2015 judgment of the Court of Appeals is considered, and it is DENIED, because we are not persuaded that the questions presented should be reviewed by this Court.

MSC requested LDF amicus brief? No

The New Covert Generating (“NCG”) is a 1,100 megawatt natural gas combined cycle electric generating facility. The plant was built in 2004 at an estimated cost of around $650 Million and was purchased by the current owner in late 2008 for an undisclosed amount greater than $510 Million (the actual amount was kept secret by order of the Tribunal). NCG appealed its assessment and sought a reduction of its property tax values because, it claimed, the generating plant was obsolete. Following a trial, the Tribunal agreed with NCG that the plant was obsolete and reduced the true cash value of the plant by more than 65 percent, to $179 Million for tax year 2010 ($162/kw). However, unbeknownst to the Tribunal and the Township, while NCG was arguing in the Tribunal that the plant was obsolete, NCG was providing directly contrary expert testimony before the Michigan Public Service Commission (“PSC”). Before the PSC, NCG disclosed it had made two offers to sell its plant to Consumers Energy at a price comparable to $750 Million. NCG’s sale price was well above its purchase price, 3½ years earlier. To the PSC, NCG argued that its proposed sale price was supported by the market because NCG was the cleanest and most efficient electric generating plants in Michigan. NCG claimed that the plant was functionally and technologically equivalent to the proposed Thetford facility.After discovering these new facts, the Township sought and, in June, 2014 the Michigan Court of Appeals granted, a remand to hold an evidentiary hearing to evaluate the new evidence. At the hearing this past July, NCG acknowledged that it had made three, not two offers, to sell the NCG plant for prices as high as $820 Million and as low as $740 Million. The offers were based on NCG’s internal cost information. NCG refused to disclose the proposed buy-sell documents. The Tribunal also learned that far from being obsolete, the NCG plant was the 12th most efficient electric plant in the U.S. in 2012.For the five years since this litigation began, the total revenue loss to local units in Van Buren County exceeds $32 Million. The Tribunal’s decision will result in a devastating 40 percent reduction in funding for the Township and the local school district. In each of the tax years at issue, NCG refused to file property tax statements and, in the second year of appeal, refused to pay its property taxes. Over the Township’s objection, the Tribunal refused to require NCG to complete and file the required property tax statements, MCL 205.735a(4)(b), and refused to withhold its final decision until the property taxes were paid. The delinquency exceeds $17.5 Million. Further, the Tribunal’s opinion of value is substantially lower than any other power plant in the state (on a price per kilowatt basis) and has already inspired a Consumer’s Energy tax appeal of the 935 megawatt gas-fired Zeeland Generating Station. Consumer’s purchased the plant in 2007 for $517 Million and now claims that the plant is worth only $225 Million. The Zeeland appeal threatens a $4 Million annual revenue loss to the City of Zeeland, its school system and other affected local units.

Case Number: 2014-05
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