New Hampshire Telcos Challenge Pole Tax Assessments

"We hate to do it,” Stafford told us about the litigation. “We really do.” He wasn’t willing to disclose the three communities Granite is challenging because the communities themselves likely don’t know yet, he said. He said Granite is driven to do this out of concern about its customers and a desire not to raise its rates. “It’s a tough thing for us to swallow. And we couldn’t."

Telcos have paid telephone pole taxes since July 1, 2010, legislation ended a telco exemption lasting several years. FairPoint and other telcos have sought to restore such an exemption over the last two years and that effort last failed in February. FairPoint slams the pole assessment methodology as not “clearly defined” and the assessments as “inconsistent.” The average assessment of FairPoint poles varied from $277 in one municipality to $587 in another, a spokesman said. Stafford pointed to one community where a pole assessment was $219 and another where it’s $744. The FairPoint spokesman also pointed out the company is taxed not only for the poles but for right-of-way and for providing communications services: “Is it fair to have three taxes?"

"At this point the big fight seems to be about how the poles are assessed,” said Cordell Johnston, government affairs counsel at the New Hampshire Municipal Association. “[FairPoint is] challenging the way the different towns are assessing it.” He told us he wouldn’t be “that surprised” if FairPoint succeeds in some of its challenges but guesses the “vast majority” of pole assessments are in a “fairly close range” and not “out of line.” FairPoint may use these varying assessments to argue telcos should be exempt from the pole taxes, he said. “We have long argued that the exemption for telephone companies should be repealed.”

"It is inconceivable that a pole in one community could have a 200 percent swing in value in another,” said FairPoint New Hampshire President Patrick McHugh in a statement. “Poles in differing municipalities have no unique characteristics, such as homes with a view and commercial properties designed for business purposes; poles simply are a piece of wood used to support wires and fiber.”

Jim Michaud, an assessor for the town of Hudson, N.H., strongly disagreed. FairPoint’s argument “doesn’t really hold out to scrutiny,” he told us. Various factors influence how poles are assessed and they aren’t all the same, he said. There are 20-foot poles, 30-foot poles, 45-foot poles and 60-foot poles and they vary based on age and condition, Michaud said. FairPoint “would disagree with that contention” that all these factors would matter so much, the spokesman said. “The discrepancies are still huge."

FairPoint also was not very forthcoming with its data, and Hudson initially had to extrapolate based on mileage, density and what it could learn from other entities that co-own the poles, Michaud said. Communities in New Hampshire did sit down and coordinate on how to appraise in 2011 but the state doesn’t require methods to be the same for all 234 municipalities, he said. The relevant legal question would be whether the value appraised in Hudson is accurate based on the assessors’ methods, not a town-by-town comparison, he said.

FairPoint first sought to pay for these new pole taxes with a 99-cent surcharge to its customers. This attempt is chronicled in a lengthy proceeding with the New Hampshire Public Utilities Commission starting in November. In late June, the PUC “concluded that the municipal property tax expense was a new expense for the Company and one for which it may seek recovery” but later determined that, due to new New Hampshire law, it “would not possess authority over certain of FairPoint’s retail rate setting as of the bill’s effective date, August 10, 2012” (http://bit.ly/P3n1Lu). Its briefly authorized surcharge was set to expire on that day. Afterward, the commission said FairPoint could “adjust its retail rates up to a statutory cap without seeking Commission approval or adjust certain of its rates without regard to the cap, subject to Commission review and approval.” The municipal association agreed with the commission, Johnston said. FairPoint is entitled to recover its costs but not through such a surcharge, he said, adding “it should be included in their operating expenses."

But FairPoint “owes it to our customers” to challenge these taxes before changing its rates, it said this week. “Our goal is to provide quality telecommunications and data services to our customers at a fair price and we do not want to build excessive pole, conduit and right-of-way taxes into our rate base,” McHugh said in a statement.

"I don’t see how they can challenge all the assessments,” Johnston said. Michaud told us the municipalities aren’t ultimately the ones who benefit from these taxes. “We don’t end up with more money,” he said. “We end up with the revenue the voters have approved.” The assessors are willing to sit down and talk with FairPoint and other telcos, he said. He’s “not eager” to hire attorneys, he added.

Stafford expects the litigation will take “months to play out,” he told us. Granite’s concern is “constitutional” and it hopes to end the tax altogether and if not that, then at least see it reduced and with a sensible methodology, he said.