Laserfiche WebLink
base comprised of these energy producing <br />facilities is not predictable. The <br />unpredictability is a result of law and rule <br />changes that determine the amount of utility <br />tax base available for host communities." <br />Cities which host Investor Owned Utility <br />base load power plants have faced <br />unpredictability in tax base from both <br />changes to state law regarding the personal <br />property tax on electric generation <br />equipment and from changes in valuation <br />due to the upgrade/depreciation cycle of <br />equipment. <br />The Minnesota Legislature has introduced a <br />reform to the system of taxing electric <br />generation. It repeals the personal property <br />tax and all of its exclusions and exemptions, <br />and replaces it with an "electric generation <br />tax base" which is subject to local property <br />taxes. This proposal also repeals the <br />personal property tax on transmission and <br />distribution and creates a "Valuation for <br />Electric Transmission Line Tax Base," a <br />"Valuation for Electric Substation Tax <br />Base" and an "Electric Distribution Line <br />Tax Base." <br />The proposal defines the tax base for electric <br />generation in a new way for electric <br />generation plants which use coal, oil, natural <br />gas, nuclear fission, biomass and flowing <br />water to generate electricity. Under the <br />proposal, the Department of Revenue would <br />annually assess the tax base of electric <br />generation machinery under a set of <br />statutory formulas. The new valuation which <br />replaces the value of electric generating <br />equipment is based on a combination of an <br />individual facility's nameplate capacity, <br />average energy production and amount of <br />nuclear waste storage. <br />The proposal also replaces the taxable value <br />of electric transmission and distribution with <br />statutory formulas. The Department of <br />Revenue would assess the value of the <br />"electric transmission line tax base" <br />according to the number of miles of electric <br />transmission within the taxing jurisdiction, <br />the value of the "electric substation tax base <br />according to the sum of the capacity of a <br />substation, and the value of the "electric <br />distribution line tax base" according to the <br />number of customers in the taxing <br />jurisdiction that receives an electric <br />distribution. <br />These new tax bases define the value for <br />purposes of the ad valorem tax of hosting <br />jurisdictions. <br />Factors such as inflation affect the expenses <br />of host cities, so any proposal to change the <br />system of taxing electric generation should <br />account for changes in value over time, <br />using an independently reported adjustment <br />factor for changing values over time. <br />Statutory changes to the system of electric <br />generation taxation should not adversely <br />affect host city tax revenues. Any proposal <br />to change the system must include some <br />form of replacement aid which compensates <br />cities for adverse effects due to changing <br />state law on electric generation taxation. <br />Response: The personal property tax on <br />electric generation equipment as well as <br />the exemptions, exclusions and sliding <br />scales to that tax represent a patchwork <br />of taxation rules statewide. Changes to <br />state law which replace the personal <br />property tax on electric generation <br />equipment with a tax base valuation <br />based on electric generation capacity, <br />production, nuclear storage, transmission, <br />and distribution will benefit IOU host <br />cities so long as the change comes with a <br />factor to increase the tax base valuation <br />over time and reimbursement to cities for <br />revenues lost due to a change in state law. <br />League of Minnesota Cities <br />2018 City Policies Page 109 <br />