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FF-13. Pollution Control <br />Exemption <br />Issue: Minnesota grants electric utilities <br />and several other industries a property tax <br />exemption for personal and real property <br />that is primarily used for pollution control. <br />Minnesota adopted the property tax <br />exemption that now extends to electrical <br />generation systems, agricultural operations, <br />and wastewater treatment facilities in 1967, <br />before water and air pollution were heavily <br />regulated by the Environmental Protection <br />Agency and the Minnesota Pollution Control <br />Agency. The language and the purpose of <br />these statutes have evolved through the <br />years. When states first began adopting <br />these tax incentives in the 1960s, they hoped <br />to encourage utilities, industrial plants, and <br />others to install pollution control equipment. <br />Gradually, as regulation increased, states <br />adopted the exemptions to help companies <br />offset the cost of the equipment. <br />This tax benefit erodes local tax bases. In <br />2013, more than $1.8 billion of personal and <br />real property for electrical generation was <br />exempted from the market value of utilities. <br />The incentive value of this benefit is low <br />because utility companies are required to <br />install the equipment anyway. In addition, <br />these companies frequently recover the cost <br />of the equipment through rate riders granted <br />by the Public Utilities Commission. <br />Allowing the pollution control equipment <br />exemption places the cost of this equipment <br />on the citizens of the host community, rather <br />than the purchasers of electricity. <br />Response: The pollution control <br />exemption places an undue burden on <br />host communities without incentivizing <br />the environmentally responsible behavior <br />that it was originally created to <br />encourage. The League of Minnesota <br />Cities supports narrowing or eliminating <br />the pollution control equipment <br />exemption for investor owned electric <br />generation facilities. The League would <br />also support allowing utilities to continue <br />to recover their costs relating to the <br />pollution control equipment by spreading <br />those costs to electricity users. <br />FF-14. State Support for Municipal <br />Energy Policy Goals <br />Issue: The State of Minnesota has adopted <br />an energy policy focusing on the promotion <br />of energy efficiency and the expansion of <br />renewable energy with the goal of achieving <br />a reduction in carbon generation through <br />reduced use of fossil fuels. Minnesota cities <br />share this goal, but already strained budgets <br />and reserves at the state and local level have <br />limited the ability of the state to assist local <br />units of government in furthering specific <br />projects that support the overall state goal. <br />In addition, institutional knowledge and <br />capacity of most cities limits their ability to <br />explore energy efficiency or renewable <br />energy projects, even projects whose energy <br />"payback" could finance project capital <br />costs. <br />Response: The League of Minnesota <br />Cities calls on our legislators and state <br />executive agencies charged with <br />accomplishing the state's energy policy <br />goals to assist cities, townships and <br />counties with tailored efforts to identify <br />appropriate energy efficiency and <br />renewable energy projects for <br />undertaking at the local level. State law <br />should allow and support utility grant <br />and loan programs and Property <br />Assessed Clean Energy Programs, both <br />publically and privately funded. <br />The state should create a grant and loan <br />program to offset start-up capital <br />expenses for projects identified where the <br />savings in energy costs can offset capital <br />project costs or where projects are needed <br />League of Minnesota Cities <br />2015 City Policies Page 100 <br />