Nuclear plants cost so much to build — in the billions — that they paid huge property tax bills, some in the tens of millions each year. The result was lower taxes for nearby property owners, who then benefited from the best schools the utility companies' tax dollars could buy.

This trade-off is now history. And property owners who live near the plants, along with officials from affected school districts, want state financial help in making the transition.

They have their work cut out for them.

The change is one result of the 1997 state law that opens Illinois' electric utility industry to the com-petitive marketplace and enables power companies to recalculate the taxable value of the reactors. Under the old law, electric utilities gradually depreciated their plants, typically by 2.5 percent to 3 percent a year over 40 years. Now the law allows those plants to be assessed at fair market value. And these days, the fair market value of a nuclear plant is plummeting, meaning they generate fewer tax dollars. In fact, in the marketplace, nukes are worth less than they cost to build. That could prove costly for local governments.

A consultant hired by a special state committee that studied the issue estimated the market value of a hypothetical Illinois nuclear plant might be 75 percent less than the value assigned to the plant under the previous regulatory system. Because the plants pay about $120 million a year in taxes, a 75 percent assessment reduction could cut that revenue to $30 million.

The committee, headed by Timothy Bramlet, president of the Taxpayers' Federation of Illinois, was established by the legislature to measure the fiscal costs — and pose some political options.

Hardest hit would be schools, which typically get more than half of every property tax dollar from the plants. All told, the state's seven nuclear plant sites generate more than $70 million a year in property taxes for school districts. (That estimate includes the closed Zion plant. It also should be noted that some of the sites have more than one reactor.) Stuart Whitt, an Aurora attorney who represents many school districts with nuclear power plants in their territories, served as a member of that committee. By his estimate, 61 school districts, community colleges and other local governments have nuclear power plants within their borders.

The Clinton School District is a prime example. About 75 percent of the assessed value of all the property in that district comes from the nuclear plant, which Illinois Power sold last year to AmerGen Energy Co., a joint venture of PECO Energy Co. and British Energy. Roger Little, the school district's assistant superin-tendent, says the nuclear plant's $480 million assessed value could decrease to $60 million. "We're going to have to make cuts in our programs, and we're going to have a higher tax rate," he says.

Lawmakers and policy-makers most involved in the 1997 law knew this was coming. When the legisla-tion passed, sponsors promised they would do something in the future to cushion the blow for the affected school districts and local govern-ments. The future has come and gone repeatedly, but little has happened. The legislature imposed a now-expired temporary freeze on tax

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Led by Bramlet, negotiators developed a plan that would have established a transition period to the market level valuation. During the proposed transition, which would last until 2007, there would be a gradual decline, or “ramp-down” in property assessments, which would mean a gradual decline in tax income for schools and other local govern-ments. Utilities, on the other hand, would benefit from a “ramp-up” period for their coal-fired power plants, which are increasing in value. Cook County would have been exempt from the ramp-up period, so the county could increase assessments right away.

The key element of the deal, and most controversial, was state financial assistance for schools and local governments during the transition period. This would be contingent on their increasing taxes, so local property owners would share in the burden. (An early draft would have allowed affected governments to increase their maximum tax rates without referendum, but legislators treated that idea as if it were radioactive.) Any governments with large reserve funds would be required to tap that cash.

The state assistance would have totaled $80 million during the five-year transition, or $16 million a year. This proved politically impossible. The issue is a big one for a small number of legislators whose districts include schools and other local governments that stand to lose lots of nuclear money. But few other senators and representatives want to vote to send money to communities they see as having lived high for years. State Rep. Vincent Persico, a Glen Ellyn Republican who co-chairs the House Electric Utility Deregula-tion Committee, says he encountered widespread hostility on the part of some legislators toward the school districts with nuclear plants, all of which have had above-average school spending. He says the “envy factor” and “jealousy” were difficult to over-come. Indeed, during House debate, state Rep. Julie Hamos, a Chicago Democrat, voiced concern the bailout package would merely “help the wealthiest school districts in Illinois that have among the lowest tax rates.”

Yet Mike Ryan, superintendent of the Erie School District in Whiteside County, responds that his district has done well because of the Quad Cities nuclear station, but has not lived extravagantly. He says, for example, his “blue-collar, conservative com-munity” did not install frills such as heated sidewalks. “We’re not the Byrons,” he says, referring to the nuclear-supported school district that spends more per pupil than any other K-12 school district in the state. Ryan’s district ranks 11th out of 406 K-12 districts.

After negotiators concluded work this spring on the fiscal year 2001 state budget, both Stephen Schnorf, direc-tor of the governor’s Bureau of the Budget, and House Speaker Michael Madigan, a Chicago Democrat, said there was no political support for the assistance. And without the transition dollars, the plan fell apart. Whitt says the school districts will try again in November to win the funding. Still, he acknowledges the effort will be difficult. “We’re always hopeful, but I don’t know that we have any reason to hope that some-thing will carry in the fall when it didn’t happen in the spring,” he says. “The money’s the hang-up.” .

Anthony Man is Statehouse bureau chief for the three Lee Enterprises Inc. newspapers with Illinois readers. He writes frequently about utility and tax issues.

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