PUD owes $56,000 in underpaid taxes

Wahkiakum PUD commissioners learned Tuesday that a Department of Revenue (DOR) audit has determined that the utility owes the state $56,000 in underpaid taxes.

Auditor Erin Wilson announced that the audit had determined the PUD underpaid state combined excise tax over the six-year period examined in the audit.

Most of the underpayment came from a difference between two formulas used to calculate the PUD’s eligibility for discounts on the amount of tax due, Wilson explained. One is a load density discount determined by the amount of utility customers per mile. The other discount formula is based on a comparison of local rates to the average of other utilities in the state. Wilson always used the first discount formula.

However, at times the other one should have been used, the auditors told Wilson. During those periods, the tax was underpaid.

The auditors also determined that a town utility tax charged on PUD electricity customers residing within town limits should have been considered taxable revenue. Instead, based on past advice from DOR employees, the utility collected the tax but treated it as a pass-through.

Wilson said she had notes from telephone conversations both she and a previous PUD employee had initiated with DOR employees that were the basis of the pass-through procedure, but not a written opinion as the auditors requested.

“The auditors’ determination was that it’s a tax on the utility, not a tax on the customer,” Wilson said, adding that she had unsuccessfully challenged that determination with the auditors.

"I would recommend we pay the tax and move forward,” said Manager Dave Tramblie.

“There’s not much we can do except write a check and pay it,” agreed Commissioner Dennis Reid.

Commissioner Bob Jungers suggested negotiating a reduction to the DOR’s late payment penalty of approximately $2000 as a response for paying the tax due.

The commissioners asked PUD attorney Tim Hanigan to research the matter and decided to wait to act until their next meeting. Payment is due to DOR by November 28.

Since the announcement that the $3,500 system development fee waiver for new water customers will expire on December 31 of this year, more than 10 people have made inquiries about hooking up to the system, Tramblie said.

Tramblie explained that he had sent letters urging all households affected by what he termed a “double minimum” to take advantage of the fee waiver. “Double minimum” refers to a situation where one water meter serves multiple customers. Tramblie estimated that the utility has 12 customers that fit those criteria. Having two customers served by a single meter could create difficulties if, for instance, the water service of a customer in good standing was shut off as a consequence of another household not paying a bill.

The commissioners approved a resolution authorizing a loan from the PUD’s electrical department to the PUD’s Western Wahkiakum Water System.

The loan will consolidate and refinance a previous electrical department loan and a Department of Agriculture Rural Development loan. The principal amount is $376,000. The loan is to be repaid over 20 years, with interest set annually at 0.5 percent over the state’s pooled investment rate fund.

The electrical department has budgeted $200,000 to make an extra payment during 2013 on a loan of their own. In March, the PUD borrowed $1.2 million from Wahkiakum County as part of the financing for the new substation currently under construction. The $200,000 is in addition to a scheduled $125,000 annual payment.

The commissioners will hold their quarterly Rosburg Hall meeting at 6 p.m. on November 20. Budgets for 2013 are scheduled for approval at that time.