Mn Legislature Covenes February 12th

It seems like each year the city of Becker and other communities that host power plants are involved with legislative concerns about taxation. This coming session is no different in that tax rates on utility property is still the concern it was last year. With the governors veto of the tax bill we lost the relief we had worked so hard on to solve our concerns.

So where does this put us? A little history first. The Mn Department of Revenue has implemented a rule change to adjust the way power plants are valued. This change resulted in a decrease of approximately 15% of the taxable property in the city. In implementing this change the rule provided for a phasing of the “loss” in value over a short period of time. A 20% reduction in power plant value was applied for taxes payable in 2008. In 2009 we’ll see the reduction at 50% and with taxes payable in 2010 the entire reduction is implemented. Using the tax rate and values of 2007 this means a loss of about $750,000 in taxes paid to the city by the utilities when fully implemented in 2010. Keep in mind they see a reduction in county and school taxes as well.

A two prong approach was accomplished to address this issue. The first involved a contingency plan to address the possible short fall in tax revenues. The second was legislative relief moving the tax rate on electric generation property from 2.0% to 3.0%. Making that change would negate the rule change to the extend that the loss in value with be picked up by a higher taxable value so essentially the same amount of taxes would be paid.

A bill was drafted in both the Senate and House to address the concerns of lost value on utility property as a result of this rule change. The bill dealt with both electric generation and pipeline taxes. The bills were passed by both groups and made it through to the final tax bill but as said previously was vetoed by the governor primarily for other reasons.

So we’re back working the bills that were developed last session and trying to get some relief from the rule change. This session could go well or not. We have the same group to deal with but we’re one year later. Has the issue changed in peoples minds? Certainly the rate from 2.0% to 3.0% will be an issue. We have already seen a small decrease in value which would be difficult to assume will be made up. You as tax payers in Becker continue to have a job to do in talking with your legislators. They need to address this issue with a helpful change in tax rates for utility property. This issue is very important for the city as well as other utility cities so please take the time to do what you can.

I will address this and the contingency plan in future entries.