By CECILIA BROWN

Journal Staff Writer

MARQUETTE — Senate Bill 1031, a proposed piece of legislation that would amend Michigan’s General Property Tax Act to exempt qualified utility personal property from being taxed will be the topic of a public forum to be held at the Negaunee Township Hall 9 a.m. Monday.

Marquette County Board of Commissioners Chairman Gerald Corkin said county commissioners will be in attendance and leaders from local townships and municipalities have been invited, along with Upper Peninsula legislators.

This forum, Corkin said, will give locals a chance to engage in a dialogue about the proposed legislation and its effects in the community — it’s a concern for local units of government, he said, because it has the potential to drastically reduce tax revenue from qualified utility personal property.

The bill, as written, defines qualified utility personal property 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.

The legislation, which was introduced May 29 by Sen. John Proos, R-St. Joseph, has since been reported favorably without amendment in the Senate Committee on Finance and referred to the Committee of the Whole.

According to a statement from Proos, the proposed legislation seeks to address high energy costs in Michigan.

“Michigan utility customers, both residential and commercial, are expected to see a 100 percent personal property tax increase over the next 10 years reflected in their energy bills,” Proos said in a statement. “All taxes are a part of utility customer rates set by the Michigan Public Service Commission. It is time for Michigan’s personal property tax code to be updated so that it encourages investment in Michigan’s growing energy grid and infrastructure.”

While the intent behind the legislation may be to address energy challenges and electric rates, which have historically been high in the U.P., legislators, counties and local units of government in the U.P. are concerned about the significant reduction in tax revenue, as 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,” states a nonpartisan June 7 analysis of the bill, as reported from the Senate Finance Committee.

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

Corkin estimates Marquette County would have a “loss in excess of three-quarters of a million dollars, approximately” if the legislation were to be passed as written.

Corkin advised this estimate is not an exact or final number, but a rough estimate — over time, Corkin said, as utilities replace qualified utility personal property and this property becomes tax exempt under the bill, the taxable base from this type of property would shrink significantly, as all qualified utility personal property would eventually become exempt as it was replaced.

“While the initial fiscal impact would depend on the rate at which new property would be installed, as property ages and is replaced, the bill would eventually exempt all eligible utility personal property,” the analysis states.

Corkin says he believes the legislation would lead to an increased burden on locals, if passed.

“(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 in a previous Mining Journal article about the legislation, 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, etc.? These kinds of things you need in counties, local townships and cities.”

Corkin said at a recent meeting with other U.P. county commissioners, “a lot of very strong comments” were made about the proposed legislation from counties across the U.P., noting “all 15 counties strongly oppose this legislation.”

In Marquette County, locals have been particularly concerned about the bill because of the new F.D. Kuester Generating Station being built by the Michigan Energy Resources Corp. in Negaunee Township — they are concerned because the project began after Dec. 31, meaning newly installed qualified personal utility property would be tax exempt under the amended General Property Tax Act, if SB 1031 were to pass.

However, in a statement about the proposed legislation, UMERC officials said they don’t believe the bill would apply to their generating stations, as the bill exempts transmission and distribution systems, but does not exempt power generation equipment.

“It’s still early in the legislative process, however we do not believe this bill will apply to our UMERC generating stations. We understand the concerns of local communities and will closely follow the development of this bill,” the official statement reads.

While the proposed legislation does not include generating stations as qualified personal utility property, the extent of qualified personal utility property that would associated with the new generation station is unclear.

SEMCO Energy Gas Company, a regulated public utility that delivers natural gas to parts of Michigan, including the central, eastern and western parts of the U.P. and owns over 100 miles of gas transmission lines, according to a 2017 annual report, has stated they are currently neutral on the legislation and have not analyzed the impact of the proposed legislation on SEMCO.

“SEMCO is not involved with the crafting of the legislation that has been put forward and we have been and continue to be neutral on it right now,” said SEMCO officials.

Furthermore, SEMCO officials said that their rates are set by the Michigan Public Service Commission, noting “if legislation were to move forward, were to be enacted, it would take action (by the) Michigan Public Service Commission to change rates.”

In a statement about the proposed legislation, Proos said he will be hosting work group discussions over the summer to engage in a dialogue about the bill.

“I am hosting work group discussions this summer on the bill to find the best public policy solution that will not only balance our need for robust reliability, but also recognize the desire by some for increased local revenues generated from personal property taxes,” he said in the statement. “Without a doubt, a good policy solution would encourage investment and would keep energy affordable for Michigan families. After all, we need to keep the lights on and keep our bills low.”

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