County, legislators weigh in on proposed tax cuts for utilities

MARQUETTE — Upper Peninsula legislators and counties are weighing in on Senate Bill 1031, a piece of legislation that would amend the General Property Tax Act to exempt qualified utility personal property from being taxed.

The property could include electric, gas and water distribution systems, transmission lines used by gas and oil transporting companies, as well as substation equipment installed after Dec. 31, 2017.

SB 1031 was introduced May 29 by Sen. John Proos, R-St. Joseph, and has since been reported favorably without amendment in the Senate Committee on Finance.

If passed, it 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, according to a nonpartisan June 7 analysis as reported from the Senate Finance Committee.

The analysis states local losses would total in the hundreds of millions of dollars if the legislation is enacted as written.

“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.

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

Marquette County Board of Commissioners Chairman Gerald Corkin said this is of significant concern for counties, as well as the state.

“This is not good news for the state of Michigan or Marquette County or any other county because it would have devastating effects on the revenues for cities townships, villages, counties and the state schools, intermediate schools and community colleges,” he said.

State Rep. Sara Cambensy, D-Marquette, said the bill, if passed, would have a negative impact on local units.

“Senate Bill 1031 is a dangerous bill that threatens the ability of our local units of government to collect critical tax revenue from utility companies whose infrastructure runs through their village, city, township and county jurisdictions,” Cambensy said in a prepared statement.

Rep. Scott Dianda, D-Calumet, said he is concerned that the costs of running local communities is going up, but local revenues are decreasing.

While the intent behind the bill may be to address energy challenges and electric rates, which have historically been high in the Upper Peninsula, many have expressed concerns about the significant reduction in tax revenue and the shift of burden from ratepayer to taxpayer.

“It’s my understanding that the legislation was prepared to save ratepayers revenue and that the company would be able to lower or stabilize rates if they didn’t have to pay this tax. Now the problem with that is, you now shift the burden from the ratepayer to the taxpayers,” Marquette County Commissioner Joe Derocha said. “That’s unacceptable because it varies throughout the state.”

Corkin said he believes the legislation would lead to an increased burden on locals if it passes.

“(They’re) trying to say this is going to improve the rates. When you lose half your revenue in any community, you need to provide the basic services, the money has to come from somewhere,” Corkin said, adding, “They’re taking away 3.5 percent of the whole revenue for the whole state. How do they think that we’re going to be able to provide basic essential services like police, fire, etcetera? These kinds of things you need in counties, local townships and cities.”

The legislation is of particular concern in U.P. counties in which qualified new personal utility property is being installed, Corkin said, noting “the proposed legislation “was never discussed with Negaunee Township or Marquette County or Baraga County, which would be affected immediately with this.”

In Marquette County, Upper Michigan Energy Resources Corp.’s new F.D. Kuester Generating Station is being built in Negaunee Township. Because the utility was installed after Dec. 31, 2017, parts of it would be exempt under the amended General Property Tax Act if SB 1031 were to pass.

Of the UMERC project, Corkin says “we advocated for it with the idea that it would support the tax base with the loss of the Presque Isle plant in 2020.”

Derocha said: “We’ve supported the $193 million UMERC project in Negaunee township and that’s in my district,” adding if SB 1031 passes, local units will have “no financial benefit or limited financial benefit,” from the project “because this bill literally guts UMERC from paying taxes.”

He said he feels development in communities should come with benefit to communities.

“Nobody wants a power plant or a paper plant, which may have odor, or a mine or processing facility, because of its concern of environmental hazard … This piece of legislation takes a portion of the community benefit away from the local unit,” Derocha said. “Anytime you rob the local unit, it’s wrong.”

Dianda said he believes it’s important to bring investments into local communities, but not at the cost of locals.

“We have to make sure that capital is welcome to come in, but we have to sure make our residents and municipalities aren’t going to put up the cost,” he said, noting “we want everybody to have a fair shake on taxation.”

Cambensy said: “As the energy landscape evolves, investments in new infrastructure will need to be made. Yet gouging our local governments in order to try and offset these electrical upgrades is irresponsible at best. At a time when we have decreased revenue sharing from Lansing by $8 billion dollars over the last 15 years, implementing a bill to gut local tax revenue — up to 65 percent in some areas of our state — is unacceptable.”

With these concerns, locals have been reaching out to legislators to share their opinions on the bill. Corkin said the board is putting “full effort into fighting this kind of legislation” and has been sending out information to counties across the U.P.

Sen. Tom Casperson, R-Escanaba, cosponsored the bill because he believed it was an opportunity to address energy challenges and costs in the U.P. But after speaking with locals about the matter, Casperson and his office staffers are taking another look at the legislation, said Marty Fittante, Casperson’s spokesperson.

“The adverse impact to locals may be far different and (more) significant than was realized when he was approached as a cosponsor … At this point, we’re trying to better understand what that impact to the locals truly is,” Fittante said, noting “we’re hearing from locals, we appreciate that and we want to continue that dialogue.”

He said they want to address the energy challenges and high energy costs facing the U.P., but don’t want to do it on the “backs of the locals.”

“As you get more into the detail, you recognize that there’s another side that really needs to be considered here, as we’re hearing from the locals … it then requires us to pause to make sure that the initial outlook and embrace of the bill can be supported and sustained,” he said. “Now that this bill has been raised in that context, it really requires us to pause to make sure that their concerns are being heard and that we’re not being unfair to them.”

Cecilia Brown can be reached at 906-228-2500, ext. 248. Her email address is cbrown@miningjournal.net.