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Rome McGuigan partner Joseph J. Cassidy says his utility clients just wanted a fair shake. They got a record tax refund of $15.6 million. In a powerful indictment of Meriden, Conn.’s tax practices against gas and electric utilities in the 1990s, a Tolland, Conn., Superior Court judge laid bare a history of valuation abuses so egregious they violated the taxpayers’ state and federal constitutional rights. Judge Thomas A. Bishop ordered refunds to two utilities of $15.6 million in illegally assessed taxes and interest after a 16-day trial in the complex litigation court. The judge found that Meriden’s assessor farmed out personal property valuation work to a private company on a contingent fee basis, insidiously building bias into the system, and baselessly inflating tax bills. The case may spell the end of a new revaluation practice — paying private companies to reassess property on a contingent-fee basis, directly linking their pay to tax hikes. The abuses that Bishop details are so momentous that he begins his 57-page opinion quoting historic judicial pronouncements about taxation, that while it is the lifeblood of government, it can be a “worm at the root” destroying “both root and branch.” In short, Bishop declared, “this case implicates the destructive potency of government when it misuses its taxing authority.” Furthermore, in what the judge calls an abdication of the assessor’s duties, the assessor’s auditor multiplied valuations, without analysis, by simply applying a whopping factor of 1.90 for personal property of Connecticut Light & Power Co. and 2.90 for Yankee Gas Co. Bishop said Meriden’s multiplier and contingent fee approach was unique, simple and illegal: “It is clear to this court that the risk of a due process violation is inherent in paying those involved in the property tax assessment process based on the amount of taxes assessed or collected.” Giving a valuation adviser a direct financial interest in the amount assessed creates an incentive to recommend the highest possible property values, Bishop found. The resulting bias “deprives the taxpayer of his constitutional right to an impartial adjudicator and his right to due process.” The fairness and impartiality of Meriden’s taxing system also violated the equal protection clauses of state and federal constitutions, Bishop found, stating it was “fatally compromised” between 1991 and 1998 by the valuation approach arranged between Meriden and Northeast Financial Management Associates. In 1994, Meriden’s former tax assessor, Steven Hodgetts, selected 400 companies to audit, picked randomly from the upper half of the town’s 1600 businesses, in terms of personal property valuation. NFMA was to be compensated for its audit services on a contingency fee arrangement, the court notes, which would have created fees of $1.2 million for the audit years 1991 through 1994 alone. The town’s utilities were some of the biggest taxpayers and required special auditing expertise. NFMA’s James Crozier and Jeffrey Coulson were not licensed appraisers or experienced in valuing utilities. They turned to two men in New York and New Jersey, Donald Swanton and John Parker, whom they considered utility experts. Parker and Swanton were to get a 33 percent cut of NFMA’s earnings from the audit for their consulting advice. They worked up a “reproduction cost new less depreciation” study of Yankee Gas and CL&P, and came up with their “multiplier” method. By Swanton’s admission, the resulting study was a “very rough estimate and not an appraisal,” Bishop wrote. Meriden’s assessor was unaware of the limited qualifications of the consultants, Bishop wrote. Hodgetts, “thinking erroneously that NFMA had hired utility experts to determine the fair market value,” accepted their recommendations without independent analysis of his own. For tax years 1992-94, “the assessor simply multiplied the amount reported” by the two factors, making no adjustments for property that may have been added or subtracted. The use of the flat factor, Bishop wrote, was “an unreasonable shortcut.” Hodgetts explained that he used the 1.9 and 2.9 flat multipliers for tax years 1995 through 1998 for consistency and on advice of counsel, because tax appeals were pending. Bishop notes dryly that courts have recognized many valuation methods, but simply claiming “legal expedience” is not one of them. By applying lockstep increases from 1995 to 1998, “without regard to the property itself, the assessor abdicated his lawful responsibilities to determine the fair market value of the subject property,” the judge wrote. In the 16-day trial in January, Joseph J. Cassidy, a partner in Hartford’s Rome McGuigan Sabanosh, was lead counsel for the utilities, and was assisted at trial by associate Thomas J. Lengyl. Cassidy, clearly elated, said, “All that these utilities wanted was for Meriden to give them a fair break.” Meriden, represented by Harold B. Finn III of Finn Dixon & Herling of Stamford, argued that the utilities could not appeal their taxes because they had already paid 75 percent under protest. Although there is a statute allowing an appeal without paying taxes, Bishop wrote that preventing taxpayers from paying and then suing for a refund “would serve no public policy known to the court.”

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