By Rupert Howell

LSP Energy Limited Partnership, owner of the natural gas-fueled power plant on Industrial Drive in Batesville, filed for Chapter 11 bankruptcy February 10 which may have a serious impact on local governments, schools and taxpayers.

Filed in Federal Court in Delaware, the suit’s list of top 20 unsecured claims does not include the approximate $4.5 million owed the City of Batesville, Panola County and Panola Partnership, a large portion of which helps fund the South Panola School District.

The initial filing indicates, “Debtor estimates that funds will be available for distribution to unsecured creditors,” and notes that the company has between $100-500 million in assets with a similar box checked for estimated debt.

“We’ve got a problem,” said Bill Bryant who has served Panola County for decades as consultant to the Tax Assessor’s office.

Of the approximate $4.5 million in taxes owed, the amount owed in school taxes is “pretty close to $1.8 million. As you can see real quick, that is a major problem.”

Panola County Administrator Kelley Magee said the county receives a “little more than South Panola schools,” estimating approximately $1.86 million.

Of that amount Magee estimated approximately $500,000 goes to road and bridge funds with the remainder going to the county’s general fund.

Both Magee and South Panola School Superintendent Dr. Keith Shaffer (school board president Sandra Darby is employed by LSP and not available for comment at press time) indicated that relief could come by the county issuing tax anticipation notes. But Magee said she would rather see belt tightening in the county—at least through August when the tax collector holds the annual sale of land for delinquent taxes and a large amount of taxes comes to the county’s coffers.

Magee is also optimistically watching December 2011 and January 12 tax collections hoping to see a positive trend in collections while noting that many property owners pay taxes before the end of the calendar year or by the January 31 deadline.

Batesville Mayor Jerry Autrey said that the city will have to do some belt tightening also as his board budgeted approximately $800,000 in revenue from LSP taxes.

Autrey noted that the unpaid taxes, along with a mild winter that has curtailed sales of the city’s natural gas, would likely cause “…projects we wanted to do, we’re going to hold off on for now.”

He gave examples of a real estate purchase and beautification projects as being postponed for the present time. A memo went to all city employees and officials noting imminent cutbacks.

Panola Partnership Executive Director Sonny Simmons wouldn’t speculate on how the bankruptcy will affect his agency that is responsible for economic development.

Panola Partnership oversees an approximate $31,000 monthly payment from LSP in a structured payment plan that was agreed upon when the state assisted in providing infrastructure for LSP to operate, such as the water line from Enid Dam, on the front end of the project.

Those funds must be used for economic development such as, buildings, property, infrastructure and matching funds. An industrial park near the airport is currently being developed with those funds.

Bryant at the tax office has seen a similar situation in DeSoto County where a power producing facility had financial problems but quickly explained that DeSoto County’s large tax base, and the fact that the facility there was only making smaller payments in lieu of taxes, caused it to be less serious than Panola’s current situation.

The company is in its first year of paying full taxes after taking advantage of state incentives  that allow companies with more than $100 million in capitol investment to pay approximately one-third of the taxable amount “in lieu” of taxes that totaled $2.1 million for 2010.

Bryant said the situation also paralleled — but on a much larger scale — a recent local hospital bankruptcy where taxes were delinquent during a re-organization.
Bryant predicted the unpaid taxes will eventually be paid but asked, “What are we going to do in the mean time to survive it?”

He explained that LSP’s tax assessment was included in budgets approved last summer and fall that have already gone into effect and that all those entities may face a shortfall during the current fiscal year.

That’s unlike when the hospital went into bankruptcy with unpaid taxes according to Magee who said that she had anticipated unpaid taxes at the hospital due to their bankruptcy and did not include those taxes in that year’s budget. The hospital is now under different ownership.
Repeated attempts to contact the local LSP office were unsuccessful.