Volume 08-3 ~ March 31, 2008
Topics
GRE Personal Property Tax Exemption
Utility Property Taxes Increase
The Easter recess brought the Legislature back on Tuesday, racing to beat the 3rd committee deadline on Friday, March 28. So, by now, all bills should be out of committees, except for tax, finance, and a few others. Finance committees are the current holding spots for the cap and trade bills, HF 3195/SF 2818. The bills still can be acted upon by a finance committee, and then be referred to the Rules Committee for any possible further action. Interestingly, the Senate cap and trade bill was scheduled for hearing in the Senate Environment and Energy Budget Division, chaired by Senator Ellen Anderson, the author of SF 2818, but the bill was removed from the hearing schedule. Makes us wonder what is going on behind closed doors, and nobody is talking.
A possible explanation for no action on the cap and trade bills is that the legislative emphasis might have switched to green jobs and a green economy instead, especially since the Legislature in any event will eventually act on any cap and trade program offered by the Governor through the Governors’ Midwestern Greenhouse Gas Reduction Accord, which he signed in November 2007. The basis for this speculation is that the House and Senate energy and environment finance committees have included (HF 2305 incorporated into HF 1812) or hope to include (SF 3539 and SF 3540 into an omnibus bill) language to coordinate economic policy with environmental policy and to create a green economy transformation task force.
In coordinating economic development and environmental policy, the Department of Employment and Economic Development (DEED), along with the Jobs Skills Partnership Board, must cooperate to promote job training that complements green economy business development. And in various State grant programs, one of the priorities is projects that advance or promote the green economy. The “green economy” means products, processes, technologies, or services that increase renewable energy, increase energy efficiency and conservation, reduce greenhouse gas emissions, expand the use of biofuels, or protect the quality of surface waters.
The green economy transformation task force is created to help transform the State’s economy by developing a statewide action plan that “responds to and benefits from the environmental and energy policies of the state.” The policies listed are the same as those listed above for the “green economy”. The task force members will include six legislators, six state agencies and universities, and one each from utility, financial institution, labor, environmental, venture capital, local economic development authority, whoops another environmental, and whoops another person or group probably not from commerce or industry. A task force report is due to the Legislature by January 15, 2009.
GRE Personal Property Tax Exemption
The Senate Tax Committee passed its omnibus tax bill, SF 2869, without a provision granting Great River Energy a personal property tax exemption for its proposed natural gas peaking plant in Elk River. The same provision was included in last year’s Senate omnibus tax bill, which, after conference committee and repassage, was vetoed by the Governor. What’s the deal? Perhaps some senators do not like, or no longer like, the idea of using natural gas for power plants, as opposed to residential heating and industrial uses. For example, Senator David Tomassoni introduced SF 3483 prohibiting the PUC from issuing a certificate of need for a new or expanded power plant using natural gas. This bill, however, might be geared toward helping Excelsior Energy get its proposed IGCC plant built. That bill was not heard in the energy committee.
Another twist is found in the Department of Revenue fiscal notes. In years past, the DOR stated that exempting proposed power plants from the personal property tax had no fiscal impact since the tax monies have never been collected in the first place. Now, the DOR sees tax shifting and lost opportunity cost. In its analysis, DOR states that “upon completion of the proposed facility, the property tax exemption will reduce the local tax base relative to the base under current law and cause a property tax shift to all other property including homesteads. The increased property tax burden on homesteads caused by the exemption will increase state-paid homeowner property tax refunds by about $80,000 beginning in FY 2012.”
As though that is not enough, the chair of the Senate Tax Committee, Tom Bakk, said in committee that the 15-year old policy of granting personal property tax exemptions to electric power plants fueled by natural gas are probably over.
On a brighter side, the House Property Tax Division heard HF 3883 this past Friday. As it often has done in the past, the AFL-CIO supported GRE’s request for the exemption. And as with all bills heard that day, the GRE bill was held for possible inclusion in the House omnibus tax bill.
Utility Property Taxes Increase
The Senate omnibus tax bill, like last year, includes an increase in class rates for utility personal property. For generation personal property, the 2.0% rate will increase to 2.5% levied in 2008, payable in 2009, and then increase to 2.8% payable in 2010, and thereafter. Transmission and distribution personal property will go from 2.0% to 2.15% payable in 2009, and then to 2.25% for 2010 and thereafter. On top of that increase, generation plants in the Senate bill would no longer be exempt from the statewide general levy, which is applied to all commercial-industrial-utility property. And the levy base amount is increased from $592 million to $747 million. The State needs to make up that estimated $935 million budget deficit somehow, and current utility plants cannot pick up and move to another state.