Bankruptcy Filing Threatens Tax Bases

QUINCY, Calif. —  The PG&E; bankruptcy protection filing Friday came only four days before the state’s largest utility is to make $80 million in property tax payments to 49 California counties.

In Northern California’s remote Plumas County, this was especially bad news. Because of its large hydroelectric holdings, Pacific Gas & Electric is Plumas’ largest taxpayer, accounting for about 18% of the county’s $2.3-billion tax base.

Bankruptcy laws usually require that government obligations, including taxes, be paid first. But the uncertainty over financially crippled PG&E;’s ability to pay sent tremors through government offices in the High Sierra county south of Mt. Lassen.

“If we took a hit like that, we were probably looking at job layoffs and program curtailments,” said County Assessor Chuck Leonhardt. He said things ranging from library books to police salaries could be affected.

The state’s two biggest private utilities, PG&E; and Southern California Edison, annually pay more than a quarter-billion dollars in property taxes, including $70 million levied on Edison by Los Angeles, Orange, Riverside and San Bernardino counties. Edison officials said their company intends to meet the Tuesday property tax deadline.

The biggest impact of unpaid taxes falls on the state, which is legally required to supply most uncollected money that is for schools--which is most of the property tax load. In smaller, rural counties like Plumas, which has a permanent population of only 22,000, a utility tax default would seriously reduce funding for other local services. PG&E; pays Plumas almost $4 million a year in taxes.

A large county that could be seriously hurt by a PG&E; default is San Luis Obispo on the central coast, where the utility’s Diablo Canyon nuclear plant generates $28 million in property taxes, about 15% of the county’s tax revenue.

“This is not catastrophic for us, but it is significant,” said county Auditor-Controller Gere Sibbach. Sibbach said one large school district, San Luis Coastal, could come up $2 million short as a result of a PG&E; default.

“That school district gets $10 million in taxes from PG&E;,” Sibbach said, “but the state will only backfill for $8 million, so they would have to cut programs if PG&E; doesn’t pay.”

Plumas County faces a double threat in the PG&E; bankruptcy filing.

Here, beautiful Lake Almanor and other hydroelectric reservoirs are strung along the north fork of the cascading Feather River. The “PG&E; lakes,” as the reservoirs are known here, are what attract retirees and tourists--mainstays of the fragile local economy since the timber industry went into decline.

The landscape here is rich in broad, green valleys and more than 100 lakes. In addition to boating and fishing, the county has 10 golf courses--one for each 2,200 residents.

Because hydroelectricity is at such a premium this year, the utility is expected to suck all the water it can from Lake Almanor and nearby Bucks Lake, bringing potential ruin to the area’s tourism and recreation industry.

“They are probably going to draw every drop of water out of the lake they can,” said Marvin Alexander, one of the retirees who lives on Lake Almanor. “The boat ramps won’t even reach the water.”

The equation here is simple: When lake levels fall too low, the fish don’t bite, the tourists don’t come and the property values decline. According to real estate agent Tim O’Brien, Lake Almanor homes have sold in recent years for $500,000 to $1 million.

These days the housing market is slow. “This community basically lives and dies by the lake levels,” explained Chris Luna, a Chester civil engineer and home builder.

The energy crisis is disrupting what had become a comfortable relationship in recent years. For most of the last decade, Plumas County homeowners and businesses have evolved a modus vivendi with PG&E.;

With electricity in good supply, PG&E; officials kept the lake high in July to keep boaters and fishermen happy. Residents agreed not to make too much fuss when the lake level declined in late August so the utilities could generate power.

But now that the specter of rotating blackouts is haunting the populous and politically powerful California lowlands this summer, few here hold out much hope that PG&E; will continue to be the benign water lord they have come to know.

“I have a feeling,” said Alexander, a former college administrator who is on a local committee that deals with water rights, “that this year the need for public power is going to take priority over the need for recreation.”

PG&E; spokeswoman Lisa Randle would not say how much water the utility is drawing from the upper lakes. But Plumas County residents took it as an ominous sign when the Buck’s Creek Power House recently began gushing water from its four big turbine discharge gates late every afternoon during peak power periods. They are not accustomed to seeing that so early in the year.

The Buck’s Creek station, amid flowering dogwood and redbud trees on California 70 in the heart of Feather River Canyon, is one of the most accessible and visible PG&E; facilities along the Plumas County watershed that engineers call the “stairsteps of power.”

When all four discharge gates are open, as they were on a recent afternoon, the station generates enough electricity to light 65,000 homes. The power is produced by the force of water that falls through pipes 2,500 feet from Buck’s Lake to the bottom of the canyon, where it drives two huge turbines.

According to Plumas County Supervisor Bill Dennison, the lakes are already 17 feet below normal capacity for this time of year. Even with additional snowmelt, he said, the lake levels are likely to be nine feet below normal. “It looks like a very bleak summer for Plumas County,” Dennison concluded.

When the lakes get too low, Alexander said, remembering the 1987-92 drought years, the sandy beaches around the Lake Almanor Country Club become mudholes and, as water in the shallow lake heats up, fishing becomes terrible.

“For the past seven to eight years the people up here have been lulled into complacency,” said Alexander. “People were in denial. They knew that PG&E; owned the lake and can do anything it wants.

“But the prospect of living up here is so attractive they just kind of throw caution to the wind and hope it will all work out.”

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Utility Property Taxes 2000-01

Pacific Gas & Electric: $157.3 million

Southern California Edison: $104.2 million

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Taxes levied on utilities in selected counties

PG&E;

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Counties Taxes San Luis Obispo $27.9 million Fresno $12.7 million Alameda $11.9 million Santa Clara $11.4 million San Francisco $11.0 million Plumas $3.8 million

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EDISON

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Counties Taxes Los Angeles $36.3 million San Diego $18.9 million Orange $14.3 million San Bernardino $11.9 million Ventura $4.6 million

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Sources: PG&E; Southern California Edison and California Board of Equalization