Litigation in the lawsuit over the valuation of the Mississippi Hub natural gas storage facility located in the southern area of the county has been ongoing since 2019 when Enstor acquired Mississippi Hub from Sempra Entergy.
Former Chancery Clerk Tommy Joe Harvey notified the board of Supervisors in December of 2019 that Mississippi Hub had filed an objection to their assessed valuation of the property citing a faltering original business plan.
In August of 2020 during a regular meeting the board heard an objection from Richard Dailey of the Burnini Law Firm on behalf of Mississippi Hub. Charles Baldwin, former Simpson County tax assessor, used construction cost as the basis for appraisal, which was over $300 million. Burnini contends that the purchase price of $99 million should be used with an assessed valuation of $80 million for Simpson County.
The difference of $19 million is due to Covington and Jefferson Davis counties. This created a significant difference in the valuation of the property which affects the amount of taxes the company would pay. The debate over the valuation of that property is based on construction cost versus what the new company purchased the property for. The new owners assert that the cost of construction is multiple times what the property was purchased for. They wanted to be taxed at the purchase price rather than the construction price.
In August of 2021 the board revisited the property vauation issues. The initial assessment of the property for tax purposes was at $367 million, matching Mississippi Hub’s original cost for construction. It was sold to Enstor for $332 million, but that price also included out-of-state-facilities in Alabama with a similar type of operation as in Simpson County. Enstor said the value of the Simpson County facility is only $89 million, and they want the tax assessment done at that level rather than the construction method. Representatives from Mississippi Hub appealed to the board for a reduced valuation.
Enstor wanted the new rate at acquisition costs, citing economic obsolescence as the reason for a decrease in value. Natural gas cost much more when the caverns were built than it does today. Such storage facilities were designed prior to fracking as a method of mining for natural gas. However, the county’s position has been that there is case law to allow for maintaining the value of construction.
Mississippi Hub paid taxes on the property after being granted a 10-year fee in lieu of taxation for phase one of the project. Mississippi Hub began operation in 2010. Taxes were paid on the property and Mississippi Hub filed an objection to the amount of taxes they were charged based on the valuation of their facility, based on the fact that the fee in lieu of tax involved a lower tax rate because the project was in excess of $200 million in construction costs. The company maintained that the property is now only valued at one-third the cost of construction.
Mississippi Hub filed suit against the county because of valuation, but the court found in favor of the county, which in turn wanted a valuation based on construction of the project. The county got a favorable ruling in the courts in 2021, but it did not prevent future objections and appeals being filed.
The tax valuation of Mississippi Hub was discussed again in July of 2022 following the same argument of construction vs. purchase price to determine valuation. The property had been sold twice since the issue began in 2019. Ownership of the facility had been transferred from Sempra to Enstor to ArcLight Capital Partners for $332 million. It was then sold by Arc -Light to J.P. Morgan Investments with a valuation closer to $100 million.
The county is currently in litigation with the newest owners of the Mississippi Hub property, J.P. Morgan Investments. Sheldon Austin, representing the new owners, appeared before the board in August of 2022 presenting the same argument that the valuation of the property has continued to drop into his estimate of the $120 million range.
The county originally taxed the property on the cost of building the facility, and previous owners have been able to take advantage of the discounted tax valuation. Now that the tax exemption period has ended, the facility is supposedly not worth what it cost to build it. However, it continues to sell to different owners.
Litigation between the two sides is ongoing. The case was already ruled on in favor of the county but was appealed to a higher court. If the court stands with the lower court’s decision, it will be a good outcome for the county and school district. If not, the funds collected in taxes so far may have to be repaid to the new ownership, J.P. Morgan.
