City to sue over AES decision

Jenny Marder

Huntington Beach will sue the state over its decision to devalue the

AES power plant drastically, a move that slashes $1.6 million in

expected property taxes from the city and postpones indefinitely

plans to revitalize the Southeast section of town.

City officials claim that the method used by the state Board of

Equalization to assess the plant’s property value was unfair, given

the $250 million poured into improvements and the plant’s waterfront

locale.

The state board reassessed the value of the Huntington Beach plant

from $260 million to $93 million early this month. The AES Corps.’

four plants combined were devalued from $1.3 billion to $591 million.

Now, the city is demanding that AES pay its fair share.

“We feel that the state board of equalization abused its

discretion in assessing the appropriate fair market value to the

property,” City Atty. Jennifer McGrath said.

Both improvements and land value -- the plant sits across from the

beach -- should have factored more heavily into the assessment, said

City Treasurer Shari Freidenrich, who attended the state board’s

meeting in Sacramento.

Harold Hale, chief of the state Board of Equalization’s valuation

division, said that land value and renovations were considered.

“In our opinion, none of those factors change the value conclusion

that we have reached,” Hale said.

To determine value, state tax assessors used a method that based

90% of assessment on income generated and 10% on replacement value.

“In this particular case, the facility is an older facility with a

significant amount of obsolescence,” Hale said. “Board property-tax

rules indicate that when a property is older and suffers an amount of

obsolescence that is difficult to quantify in cost approach, the

income approach value is the preferred approach.”

City planners had counted on the $1.6 million in property tax

revenue from the plant to help revitalize the city’s 172-acre

redevelopment area, which is hemmed by Hamilton Avenue, Newland

Street, Magnolia Street and Pacific Coast Highway.

The tax dollars would have paid for roadwork, storm drain and

sidewalk improvements, lighting, and landscaping in the Southeast

area.

The state board decision means that the city will have to postpone

redevelopment work indefinitely.

City Councilman Dave Sullivan, a member of the Southeast Area

Committee that designates money for improvements in the redevelopment

area, painted a dreary picture as a result of the reassessment.

“[Committee members] were obviously very disappointed,” Sullivan

said. “They were asking, ‘Is there any money?’ and unfortunately, the

answer was, the cupboard is bare.”

Ed DeMuelle, president of the Southeast Huntington Beach

Neighborhood Assn., was more optimistic. DeMuelle said the assessment

merely a hiccup in a 40-year project.

“The loss is significant, and it’s worth fighting over, and I

understand why they’re chasing [the property tax] down,” DeMuelle

said. “It’s a substantial amount of money, and it’s worth it. But is

redevelopment going to fall apart because of it? I don’t know about

that.”

McGrath is preparing legal documents. He has until Jan. 5 to file

a lawsuit.