Decades ago, the tower of Westar’s coal-burning power plant was a solitary smokestack in the country.
Back in the 1930s when the plant was built, the thought of Lawrence someday growing out to the facility on the banks of the Kansas River likely was seen as a pipe dream that would take more smoke than even the plant’s stack could produce.
But now, the city’s Santa Fe Industrial Park — which houses Berry Plastics, Lawrence Paper Co. and others — abuts the property. Just a few hundred yards from the front gate of the plant are city homes that have built up along the northern portion of Kasold Drive.
All that has some city leaders wondering whether now is the time to invite the power plant into the city limits. In the process, the city would add to its tax rolls — in one fell swoop — a property that is valued at about $100 million. It would generate nearly $900,000 per year in new property taxes for the city.
“I think it is time that we have the discussions about annexing that property,” City Commissioner Mike Amyx said. “There will be a lot to consider, but I don’t think it hurts us at all to start talking about it.”
But make no mistake. If the city does extend such an invitation, what will follow will not be a party. Leaders with Topeka-based Westar Energy have consistently fought any effort by the city to annex the property, saying electric customers would receive no benefit from having the plant in the city limits. Instead, the company — and thus electric customers — would be paying more in taxes simply because the city has changed some boundary lines on a map, they argue.
“From our standpoint, whenever we’ve looked at it, it seems like more money for little or no additional services,” said Chad Luce, manager of customer and community relations for Westar. “It just hasn’t made a lot of sense.”
Then there’s the Wakarusa Township. For a long, long time, the Westar plant has accounted for about half of all the property taxes generated for the township, which is the government entity that maintains the roads and runs the fire department in the rural area just outside of Lawrence. The township’s trustee said if the plant becomes the territory of the city, it would be “devastating” to the township and the tax bills of its residents.
“It won’t work,” said township trustee Ernest Butell.
In one way, though, an annexation of the plant may be more feasible than it has been in years.
The city in the early 1970s made a serious effort to annex the plant but ultimately backed away after Westar said the annexation would increase the electric bills of Westar customers across the state. The argument was that annexation would require the plant to pay a higher property tax rate. Westar has the right to pass along higher tax costs to its electric customers.
As recently as 2006, Westar estimated in a letter to the city that an annexation would increase the plant’s property tax bill by about $1 million.
But new numbers obtained by the Journal-World suggest the increase is now much less. Using property valuation numbers from the state’s Division of Property Valuation, annexing the plant and the surrounding “buffer ground” adjacent to the plant would result in a property tax increase of $290,050. Using current mill levies, the city would receive $863,861 in property taxes from the plant. That’s compared with $573,811 in taxes paid to the Wakarusa Township. If annexed, the plant no longer would pay Wakarusa Township taxes.
It wasn’t immediately clear how Westar came up with the $1 million estimate, but Luce said upon further review, Westar agrees with the new $290,000 estimate.
Luce also confirmed that Westar would be able to spread the additional costs over about 300,000 accounts in the company’s northern territory.
If the tax increase were spread out equally, that would amount to about an extra $1 per year for every electric customer. Luce concedes the increase per customer would not be huge. But he said the company is concerned about the precedent.
“As a regulated utility, every decision we make has an impact on our customers and their bills,” Luce said. “If we can’t come up with a known benefit, it isn’t prudent to ask our customers and shareholders to pay for it.”
A benefit battle
City Manager David Corliss has his staff studying the feasibility of an annexation. He suspects the coal plant receives some significant benefit from being near the city.
The plant is now close enough to the city that Lawrence provides city water service to the plant. Traditionally, businesses that use city water are required to be in the city limits. Westar, according to city records, bought 33 million gallons of water from the city in 2008, making the company the ninth largest single water user in the city. Earlier in the decade, the company was purchasing around 70 million gallons.
Corliss believes if there were a significant fire at the plant, it would be the city’s fire department that would provide the largest response to the incident rather than the much smaller Wakarusa Township Department.
And then there’s the more recent, prickly issue of the Bowersock Dam. The city earlier this month agreed to spend $2.45 million to repair the dam on the Kansas River. The city is making the repairs because the dam keeps the river levels high enough for the inlet pipe of the Kaw Water Treatment Plant to operate properly.
The city was hoping that Westar would agree to help pay for some of the costs because the coal plant has a similar intake pipe that sucks water out of the river to use in the energy production process.
Westar declined, saying a pair of studies showed that the dam was not overly important to their inlet pipe, which is farther upstream than the city’s, Luce said.
That left some city leaders disappointed.
“I have to say I was upset the other night when we got the final word that they would not consider participating in it,” Amyx said.
Luce said he understands the city’s perspective on some issues. For example, he agrees the Lawrence fire department likely would be a major responder of a significant fire at the plant. But such an occurrence would be rare.
“The question seems to be whether that possibility rises to the need to annex?” Luce said.
A tax base boon
Another way to look at it is whether the benefit to Westar would be close to the benefit the plant would have on the city’s tax base.
There’s no arguing the benefit to the city’s tax base would be huge. In fact, it could be the largest single addition to the city’s tax base in its history.
The state’s Division of Property Valuation said the plant and its buffer ground are valued at $98.23 million. In terms of its assessed value — or its taxable value — the plant would increase the city’s tax base by $32.41 million.
To put that in perspective, the city’s tax base declined by $7 million this past year, and grew by only $7.2 million the prior year.
But Corliss said an annexation would not be a tax grab on the city’s part.
“I don’t want people to believe that this is our new plan for growing the tax base,” Corliss said. “I think the main reason to do this would be because Westar is benefiting from city services.
“And then the policy question becomes whether the plant’s tax base should be helping support all the services we provide. Should it contribute to our 52 parks, should it contribute to our strong downtown, should it contribute to one of the best fire departments in the region? I think when we do the analysis, the answer will be yes. But we’ll see.”
All that rings hollow to Wakarusa Township leaders. Butell said the major question should be why the plant should be in the city.
“The only reason they want to do this is because they want the taxes,” Butell said. “The city doesn’t go out of its way to promote industry that pays decent wages. If they would go out and attract jobs that pay a decent wage, they wouldn’t have to annex anything.”
City leaders have said that working with Wakarusa Township to ensure the township’s budget isn’t destroyed by the loss of the power plant would be necessary if the city moves forward with an annexation.
“Without a doubt, we would have to create some sort of transition period for them,” Mayor Rob Chestnut said. “We can’t just leave them high-and-dry.”