Legislation aims to cut utility taxes

MARQUETTE — By delaying approval of easements requested by a utility company needed to construct a new natural gas pipeline across county property, the Marquette County Board of Commissioners is gathering that company’s support in opposition of legislation that aims to reduce the taxes paid by utilities and ultimately decrease funding for local units of government and schools.

Senate Bill 1031, a piece of proposed legislation that would amend Michigan’s General Property Tax Act to make certain types of qualified utility personal property tax exempt, has now been formally opposed by SEMCO Energy Gas Co., a regulated public utility which owns over 100 miles of gas transmission lines and serves around 300,000 customers in Michigan.

“While SEMCO believes utility (personal property tax) reform is an important legislative policy discussion, the committee passed version of SB 1031 raises a number of concerns,” a letter from SEMCO Energy President Colleen Starring to Gov. Rick Snyder states. “As you know, utilities pay personal property tax on certain infrastructure, tools and equipment. This tax is distributed to local units of government to help support essential community services. The current version of the bill doesn’t reimburse locals for what could be significant losses in taxes.”

This comes after Marquette County and other local units of government in Michigan raised concerns about the bill, as the revenue losses to Michigan municipalities were estimated to be in the hundreds of millions of dollars if the legislation were passed as written.

“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,” Marquette County Board Chairman Gerald Corkin said in a previous Journal article.

SEMCO’s letter states the bill has impacted discussions in Marquette County surrounding the company’s plans to build the Marquette Connector Pipeline, a 42-mile pipeline that would connect the Northern Natural Gas Transmission system that currently serves the northwestern Upper Peninsula to the Great Lakes Gas Transmission pipeline, which runs across the southern U.P.

“The introduction and swift committee passage of SB 1031 has complicated these conversations and SEMCO’s ability to obtain the required easements from Marquette area units of government,” according to the letter.

SEMCO has been working to finalize the remaining easement agreements needed for the pipeline, the letter states, as the company needs to secure these agreements to ensure construction can start as planned in January.

In Marquette County, SEMCO’s easement request has been under discussion among officials from the county and the company.

“We expect them to pay their fair share of taxes and have offered them a license agreement — suggested by (Marquette County Board) Vice Chairman (Joe) Derocha — that indicated to them how important the revenue is to our county,” Corkin said.

The county has proposed that it will provide the requested easement for the Marquette Connector Pipeline in the county if SEMCO agrees to compensate the local units of government in the county with payment in lieu of taxes, should SB 1031 pass.

“They need to come across county property here to bring their pipeline through and we said ‘we’re glad you’re here’ and the project that they’re doing is important to the central U.P. and the western U.P., but we are taking a stand against the corporate welfare that’s been going on in the state Legislature and taking away all the tax revenues,” Corkin said.

While the county and SEMCO have not entered an agreement regarding the license, commissioners feel the letter sent to Synder is a step in the right direction and are awaiting his response.

The county “encouraged them to oppose the bill if they want to get the job done here,” Corkin said. “So we were thankful that they did and sent the letter to the governor.”

While local units around Michigan have noted their opposition to the proposal, a statement issued by bill sponsor Sen. John Proos, R-St. Joseph, indicates the 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 June 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 bill’s intent 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 here are concerned, as tax revenue losses would be significant if the legislation is enacted as written.

“If that bill passes, according to SEMCO Energy, it’s $2 million to Marquette County in tax revenue for that project in Negaunee Township, so it’s of significant importance to the school districts, the county and the townships that it affects,” Derocha said.

To illustrate, a nonpartisan Senate analysis of the bill as written estimates local units of government would lose around $576 million if the bill exempted all existing eligible utility personal property in the state.

“We live within our means, but you can only stretch your dollar so far when it breaks and you’re losing a half a million here and a million there,” Corkin said. “It makes it tough to do what you need to do.”

The letter from SEMCO states that while the company “understands a number of points raised by those who support SB 1031,” and is “thankful to bill sponsor, Sen. John Proos, for beginning this important conversation,” the company wants to ensure the pipeline is not impacted by the policy and “believes any reform proposal should address the revenue concerns raised by local governments.”

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