Municipal leaders object to proposed tax breaks for utility company owners

Casperson, a co-sponsor, says he objects to the legislation as written

NEGAUNEE — “Devastating” was one of the many words used by municipal leaders and citizens to describe the potential negative impact that Senate Bill 1031 could have on Upper Peninsula communities.

Two dozen attendees from Marquette County and beyond attended a public forum this week with Sen. Tom Casperson, R-Escanaba, a cosponsor of the bill, and Rep. Sara Cambensy, D-Marquette, to express their opposition to the bill which, if passed, would give personal property tax breaks to investor-owned utility companies.

Ishpeming City Manager Mark Slown said the legislation would add to the plight of municipalities in Michigan, which he said had been “under siege” for years.

He said the legislation would only add to the burden of an existing revenue decline for the city of Ishpeming amounting to an average of $400,000 annually in the last decade.

“That is affecting our ability to pay for basic services,” Slown said. “And state unfunded mandates have become collectively an insurmountable burden. I hope that this legislation will be reconsidered.”

The proposed bill, which amends Michigan’s General Property Tax Act, would exempt utility personal property such as electric transmission and distribution systems, substation equipment, spare parts, gas distribution systems, water transmission and distribution systems, gas storage equipment, and transmission lines of gas or oil transporting companies installed in Michigan after Dec. 31.

Generation facilities such as Upper Michigan Energy Resources Corp’s F.D. Kuester Generating Station in Negaunee Township and the A.J. Mihm Generating Station in Baraga reportedly would not be exempt under the bill, but new gas and transmission lines as well as other equipment associated with the reported $275 million project would be.

The tax impact may not be immediate, but would have a grave impact on municipalities over time as utility companies replace aging equipment and infrastructure, attendees told the panel.

City of Marquette Chief Financial Officer Gary Simpson said he expects the legislation would have a minimum impact of $150,000 per year, and depending on how certain equipment is classified the city’s coffers could see as much as a $1 million revenue reduction.

“I just want to put it out there that this is concerning, not only to the city of Marquette, but also to the municipalities in the county,” Simpson said.

Tilden Township Treasurer Ann Pietro said while Tilden Township will not be directly affected by the legislation it currently collects nearly half a million dollars in tax revenue on transmission lines.

“Now that’s an awful lot of money just in the two entities we cover,” Pietro said. “That is $180,000 just in the NICE school district.”

Casperson said he would collect information provided by U.P. municipalities and bring the information back to Lansing.

He said his initial intention in co-sponsoring the legislation was to defray future costs for utility rate payers with the expectation that it would have no fiscal effect on existing municipal property tax revenue.

But that concept, which he said was initially presented to him by Sen. John Proos, R-St. Joseph, in May, is different than the legislation currently on the Senate floor.

“I oppose this thing vehemently the way it is written,” Casperson said. “The concept behind it when I talked to John Proos was we are going to do this revenue neutral. He said you are going to incentivize power companies — if they want to buy new equipment to replace old equipment they can do that and the revenue or tax would stay neutral. So locals wouldn’t lose any money, but they wouldn’t gain any money. I thought the concept behind it was to stabilize our energy rates.”

A nonpartisan June 7 analysis as reported from the Senate Finance Committee predicts the legislation would reduce tax revenues across the state and in local municipalities, as the total taxable value of personal utility property in Michigan is $11.9 billion.

“The analysis states the bill as written “would not reimburse local units for revenue lost as a result of the exemptions.”

“To illustrate the eventual magnitude of the exemption, if the bill were to exempt all existing eligible utility personal property, the revenue reduction would total approximately $652.8 million ($76.6 million in State Education Tax revenue to the School Aid Fund, $576.3 million to local units of government) and School Aid Fund expenditures would need to increase by approximately $243.1 million in order to maintain per-pupil funding guarantees,” according to the analysis.

The bill was referred to the Senate Committee on Finance which reported favorably without amendment and referred to the Committee of the Whole on June 6.

Lisa Bowers can be reached at 906-228-2500, ext. 242.