Utility companies should pay fair share of proposed tax

Taxes are part of our financial system and have been for a very long time, and anyone who owns property should consider how much they’ll be paying in taxes — from the first-time homebuyer who’s never before dealt with a mortgage, all the way to a large multi-million-dollar utility company looking to expand its operations.

Senate Bill 1031 — introduced May 29 by state Sen. John Proos, and cosponsored by Upper Peninsula state Sen. Tom Casperson — seeks to exempt certain “qualified utility personal property” from the collection of taxes.

It’s somewhat unclear precisely what types of property would qualify for exemption under that category, but some of it would include newly installed electric, gas and water distribution systems, transmission lines used by gas and oil transporting companies, as well as substation equipment.

A nonpartisan analysis provided to the Senate Finance Committee looked at the existing eligible utility personal property that would be exempt under the current proposal and found that the state’s revenue reduction would total about $652.8 million.

While the actual loss would be less than that, considering the legislation would apply only to properties installed after Dec. 31, 2017, the impact will be greatly felt down the road, primarily by local units of government as the bill doesn’t provide any form of reimbursement to them for the loss of those exemptions.

Moreover, there are some utility projects currently underway locally that would fall into this category, thereby depriving our U.P. governments from some new tax revenue.

Those projects, it seems, would include at least some of the equipment being installed as part of the Upper Michigan Energy Resources Corp.’s new natural gas-fueled power plants in Marquette and Baraga counties, as well as SEMCO Energy Gas Co.’s Marquette Connector Pipeline project.

Both are multi-million-dollar projects, and both were given the OK locally with the expectation that the municipalities where the infrastructure is located would receive tax revenue from that investment.

In a story that appeared on Crain’s Detroit Business website, Proos said he doesn’t expect the full Senate to take any action on it before the chamber adjourns for summer break.

That might be one of the few pieces of good news coming from this proposal, as the public and other legislators need time to fully understand the ramifications if this bill were to be passed as is.

Part of the reasoning behind the tax cut proposal, Proos said in the Crain’s story, is that utilities are making these significant investments to improve their distribution systems, and that the money to pay for the taxes on that investment will be passed on to ratepayers.

But there’s concern the bill would simply shift the financial burden from a utility’s customers to the state’s taxpayers, as the cuts to local municipalities’ revenues in the future will either mean fewer services offered or higher taxes locally to pay for them.

That is something to be considered, but with the steep prices Upper Peninsula residents already pay for energy, it seems outrageous that utility companies can’t afford to pay their fair share of taxes.

The U.S. Energy Information Administration reports Michigan’s average retail price of electricity in the residential customer class was 15.55 cents per kilowatt-hour in March. That puts us in 11th place for the highest electricity prices in the country.

We can’t say ratepayers shouldn’t see any type of increase in the future, but the utility companies should be able to absorb a good majority of that tax burden, even if it means company executives have to sacrifice part of their multi-million-dollar compensation packages.

— The Daily News, Iron Mountain