TRANSWESTERN'S 9-16-20 SETTLEMENT LETTER.PDF

Mooney, Wright, Moore & Wilhoit, PLLC

1201 South Alma School Road
Suite 16000
Mesa, AZ 85210
(480) 615-7500

Paul Moore

Direct Phone: (480) 615-7503
Main: (480) 615-7500 www.mwmwlaw.com
pmoore@mwmwlaw.com

September 16, 2020

Lisa Neuville, Esq.

Assistant Attorney General

OFFICE OF THE ATTORNEY GENERAL
2005 North Central Avenue

Phoenix, AZ 85004

Re: Settlement Offer Made Pursuant to Rule 408, A.R.E., for Pending Litigation
Matters: Transwestern Pipeline Company, LLC, vs, ADOR et al.,
1 CA-TX 19-0006;
TX2016-000931 (cons.);
TX2017-000531 (cons.);
TX2019-001725; and,
TX2020-000885

Dear Lisa:

Transwestern would like to resolve all its pending Arizona property tax
appeals related to its interstate gas pipeline for the 2016-2021 tax years and also settle the
methodology for determining the base value for the 2022 tax year and subsequent years.
The Subject Property is partially situated in seven Arizona Counties — Apache, Coconino,
Maricopa, Mohave, Navajo, Pinal and Yavapai (the “Defendant Counties”), and it is
identified by the Arizona Department of Revenue (“ADOR”) by taxpayer identification
number 53-853. The Defendant Counties together with ADOR are collectively referred to
herein as Defendants.

As you know, litigation between Transwestern and the Defendants is pending in the
Arizona Tax Court or the Arizona Court of Appeals for tax years 2016-2021, this offer
covers all those years and the 2022 tax year. The offer is made pursuant to Rule 408,

Lisa Neuville
September 16, 2020
Page |2

A.R.E., and as such its terms are inadmissible as evidence to the Court subject to the
exceptions provided within the rule. Transwestern has prepared proposed stipulated
judgments for each matter in dispute, attached hereto as Exhibits A — D, which are
incorporated into this offer letter. Transwestern offers to settle the pending litigation as
noted in each judgment and as further described in this letter. Please note that the offer is
global in nature — that is, it can only be accepted in whole as to all tax years and all values.

Tax Years 2016 and 2017

Transwestern will settle the 2016 and 2017 tax years if the Subject Property’s full
cash values are set at $452,350,000 and $437,436,000 respectively. These values are the
Subject Property’s market values pursuant to A.R.S. § 42-11001(6), as set by the Tax Court
and amended by the Arizona Court of Appeals. In addition, Defendants will also pay
Transwestern the attorneys’ fees, expert witness expenses, and cost awards previously
made by the Tax Court. A copy of the proposed Stipulated Judgment on Mandate for the
2016-2017 tax years is attached as Exhibit A. Finally, with respect to 2016 and 2017, all
parties agree to waive their rights to file a Petition for Review of the Court of Appeals’
Decision to the Arizona Supreme Court.

Tax Years 2018-2022

Transwestern will settle the 2018-2022 tax years using the statutorily-defined
valuation method set forth in A.R.S. §42-14204. To determine the Subject Property’s full
cash value for 2018, the Courts’ 2017 market value determination will be used to set the
base value for 2018 pursuant to Section 42-14204(H)(3). Each subsequent year, the
Subject Property’s full cash value and shall be determined pursuant to Section 42-14204,
using the prior year’s settlement values to determine the base value as noted in Section 42-
14204(H)(3). This methodology results in the following full cash values for the Subject

Property:

2018 - $444,300,000

2019 - $433,594,000

2020 - $438,203,000

2021 - $489,708,000

2022 — To be determined pursuant to A.R.S. §42-14204, using the 2021 full cash
value to determine the base value of the Subject Property pursuant to Section 42-
14204(H)(3).

Copies of the proposed Stipulated Judgments for the 2018-2021 tax years are attached as
Exhibits B-D. Transwestern has structured these Stipulated Judgments in a manner that

Lisa Neuville
September 16, 2020
Page: |3

will allow the Defendant Counties flexibility in how and when they either: (i) pay the
refunds, or (ii) credit refund amounts owed to TW against unpaid property taxes assessed
against the Subject Property.

In addition, Transwestern agrees to affirmatively support legislation that provides
the Defendant Counties (and any related taxing authorities within their jurisdictions) with
financial support from the State to assist them in meeting their refund obligations. Further,
the parties will cooperate on a legislative effort to resolve the underlying substantive
valuation, tax, and fiscal issues that arise out of this settlement agreement.

Please let me know if you have questions regarding this offer or any of its terms.
This offer will remain open until September 30, 2020.

Sincerely,
MOQNEY, WRIGHT, MOORE & WILHOIT, PLLC

eo

Paul Moore
PM

Cc: Paul J. Mooney
Andrew P. Price

Accepted:

ARIZONA ATTORNEY GENERAL’S OFFICE

By: Lisa Neuville
Attorneys for Defendants