Verizon challenges Virginia property assessments

Verizon is challenging the assessed value of its property in Virginia, which could cut tax revenues in the Lynchburg region by about $500,000 per year.

The telecommunications company argues that competition from other providers is reducing revenue, which should drive down the fair market value of its cables, wires, network stations and other properties. If it receives a reduction in its property values, the company plans to request refunds on its 2009 property taxes to localities.

The State Corporation Commission has started telling local governments about Verizon’s request. Although the public hearing on the issue won’t be held until March 2011, localities have to register by May 14 if they want to formally participate.

Lynchburg City Manager Kimball Payne said he was surprised by the notice. Verizon is seeking to cut the taxable value of some of its property in the city from about $52 million to $26 million. That could reduce city revenue by nearly $270,829 per year, according to The News & Advance’s calculations.

“This is a big impact for everybody,” Payne said.

Each year, the State Corporation Commission assesses the property owned by Verizon and other public utilities, much like local assessors determine the taxable value of real estate.

In September, the commission reports those assessments to localities, which tax the companies at the local real estate tax rate, said Mitch Nuckles, Lynchburg’s commissioner of the revenue.

In December, two Verizon subsidiaries that serve parts of the Lynchburg area — Verizon Virginia Inc. and Verizon South Inc. — asked the commission to review their tax assessments for 2009.

Statewide, the subsidiaries are seeking to reduce the value of certain properties from $4.1 billion to $2.5 billion, a 40 percent drop. On property in Lynchburg-area localities, it is seeking an average reduction of about 50 percent.

State Corporation Commission spokesman Ken Schrad said it is not unusual for companies to request a reassessment.

Harry Mitchell, spokesman for Verizon, said that the SCC values the property by taking the original costs and allowing for annual depreciation.

“This method that has been in place for years … may have been appropriate decades ago, when there was one phone company in town,” Mitchell said.

Competition should change that model, he said. Many people can and do drop their landline phones for wireless ones, or switch to new Internet providers, Mitchell said. “This competition and the inability of our network to produce as much revenue lessens the value of that network and its components,” he said.

The taxable value of Verizon’s network also should reflect today’s lower cost of building a new network, he said.

Local government leaders are still deciding how to respond. Payne said he would meet with the city attorney and other staff members on Monday to consider formally participating in the public hearing process.

May 14 is the deadline for registering as a formal participant in the process. Schrad said anyone can speak to the commission at a public hearing scheduled for next March, but only formal participants could initiate or participate in any appeals after the commission’s final decision.