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The following letter was mailed to Lake Burton Civic Association members with the December 2001 newsletter . . . Dear Lake Burton Civic Association Members: I am pleased to inform you that, after many months of work, Georgia Power Company is making several revisions to its lease covering approximately 4,000 leased lots on Lake Burton and all other Georgia Power Company lakes. It is important to mention that these changes will not affect the existing leases, but will be implemented at the time existing leases are renewed, or changed for cause. Also, for those desiring more flexibility in estate planning, the addendum allowing the assignment of the lease to a Family Owned Entity is written so that it can be attached to an existing lease. The changes result from the close cooperation between Georgia Power Company, Lake Burton Civic Association, Lake Rabun Association and associations of other lakes. The new lease form and lease addendum provide two main advantages for lessees:
The assignment of the lease to a Family Owned Entity is important, in view of significant increases in values of the lease rights, to allow more flexibility in estate planning through valuation, gifting during life and transfers at death. While the administrative procedures have not been finalized by Georgia Power Company, it is my understanding that the assignment of the lease can be made to a Family Owned Entity comprised solely of members within "3 degrees of blood" relationships of family members (parents, children and grandchildren). The addendum carefully defines Family Owned Entities and their members, as well as other terms because of everyone's concern about abusive use of leased property. This addendum is recognition by Georgia Power Company that extended family relationships currently exist in the use of leased property and that families desire more flexibility in defining those relationships as they relate to the leases. Georgia Power Company will require that a qualified Family Owned Entity exist in order to execute the lease addendum, but has no responsibility in establishing such an entity or in verifying its legal or tax status. You will need to work this out with the help of your attorney and CPA. In your Family Owned Entity, you will be able to add provisions unique to your family, hold other assets in the entity, etc. For instance, provisions can be included in the Family Owned Entity Agreement that set limits desired or dictated by various family situations such as the authority and ownership of the managing member(s), sharing of costs related to the property, ownership of stock of a closely held business, ownership of publicly traded securities, etc. As you may know, major changes have been made in the estate and gift laws that will be implemented over the next ten years, including the reduction of the Federal tax rates and the raising of the estate and gift exemption amount. In addition, the gifting of units of ownership in a Family Owned Entity can generally be done at a discount from fair value of the underlying assets held in the Family Owned Entity. It is important that you consult with your tax advisor on these issues before setting up your Family Owned Entity. Georgia Power Company will require that all Family Owned Entity Members sign a certificate that they meet the qualifications in the lease addendum for an owner, and that one owner be designated in writing to be the manager with authority to deal with Georgia Power Company under the lease. The addendum allowing the assignment of the lease to a Family Owned Entity will not work for every situation, however, when it does work for your family, you will certainly want to consider taking advantage of it. Georgia Power Company will have some flexibility in working with you on this new form of lessee. The modification of the cancellation provision removes the cancellation without cause provision for the portion of the lease outside of the Project Boundary. (The Project Boundary at Lake Burton is approximately 13 feet above the normal pool of 1865 feet above sea level.) However, the portion of the lease inside the Project Boundary can still be cancelled by Georgia Power Company, if for some reason they must raise the elevation of the lake pool, or for some other major circumstance unknown at this time. Copies of the new lease form and the addendum can be obtained from Donna Pendrey at the North Georgia Land Management Office (phone 706-947-3521). Again, there is no requirement that you take any action, however, if you believe that this might benefit your family, please take a look. Bill Bomar The following is a notice sent to all lessees by Georgia Power Company explaining their intent to pass on the ad valorem property taxes to lessees and the proposed schedule for implementation. Following the Georgia Power letter are the contents of the Example and Information Sheet that accompanied the letter. Below the Information Sheet is a response to this situation from the LBCA Board which was mailed to LBCA members on 2/17/00. Georgia Power Letter January 15, 2000 Georgia Power Dear [Name Of Lessee]: For many years, we have enjoyed the beauty and recreation that living on Georgia Power Company's North Georgia lakes has to offer. Regardless of whether you use the lake seasonally or, like me, live here full time, we have a shared understanding of why these lakes are considered to be among the most prestigious in the country. This understanding is clearly reflected in prices being paid for these lake properties, as well as higher tax assessments in recent years. Rabun County's tax millage rate remains one of the lowest in Georgia. Unfortunately, the ad valorem taxes on our leased lots now greatly exceed the lease rental rates being collected by Georgia Power Company. This imbalance between tax costs and lease rates is the reason for this letter. Beginning this year, Georgia Power Company will implement a program that will, by the year 2002 correct the imbalance between the cost of the leasing program and revenues generated through the base rental rates for leased lots. This program, permitted by Paragraph 25 in the current Lease Agreement or Exhibit A in the older Lease Agreement, will be phased in over a three-year period. An example of how this will affect you is attached. You may have questions concerning this new program. I am including a fact sheet, which hopefully, will answer many of these questions. However, please feel free to contact me or any member of my staff at the North Georgia Office if you have additional questions. Our telephone number is (706) 782-4014. Sincerely, /dp Example
*In subsequent years, current taxes will change depending on future millage rates and future assessments. Information Sheet Recent increases in property values have resulted in higher tax assessments causing Georgia Power to implement the tax stipulation in the lease. The following table illustrates this significant increase in assessed taxes per lot on Lake Burton. GPC Tax History - Lake Burton
Letter From The LBCA Board February 15, 2000 Dear Lake Burton Civic Association Member: Many of you, as leaseholders under Georgia Power Company leases, have received a letter explaining Georgia Power Company's decision to charge the real estate taxes on leased lots to the lessee. Approximately 90% of the Lake Burton leases are currently affected by this decision and contain provisions allowing the Company to pass through tax costs. Older leases, not containing this provision, will be affected as they are renewed during the next 2 or 3 years. Overall, this decision affected approximately 4,000 leases throughout the entire State. The taxes are assessed on Georgia Power Company, as the owner of the real estate, by the counties and are in addition to the taxes you pay directly to the county on the property improvements. Your Association Directors are concerned about this decision related to the Lake Burton leases and have met with Mr. Jimmy Wilson, VP, Land Department; Mr. Glenn Ivie, Mgr., Land Management and Roger L. Harrison, Lake Resources Manager, of the Georgia Power Company. They too, share our concerns. They emphasize that Georgia Power Company's decision is necessary because of the significant increase in real estate taxes resulting from the rise in property values around the lake. The annual tax costs have exceeded the annual lease fees for many years. This difference has become too great for the Company to continue to absorb. Georgia Power Company is attempting to assist the lessees by phasing in the tax pass-through over 3 years, delaying the invoicing of the pass-through for 2000 until midyear, and allowing a reasonable time to pay. Representatives of the Company have also agreed to look at options, which can be legally accomplished to minimize the burden on the lessees and to give consideration to providing more security for the lessees. While the issue is primarily one between the leaseholder and Georgia Power Company, your Association Board of Directors will continue to monitor this situation and to have dialog with Georgia Power Company representatives and others as appropriate. Very truly yours, LBCA Board |
Copyright © 1999 - 2004 by Lake Burton Civic Association and Scot Roberge. All rights reserved. |
