Editorial: HB 324 isn’t the answer to utility taxation problems

Sunday, October 22, 2017

A seemingly innocuous bill backed by the state’s Business and Industry Association, House Bill 324, could have a big impact on local taxpayers. It should not become law until much more is known about its effects and the precedent it would set, if ever.

The bill would transfer the power to assess the value of utility property – power plants, poles, wires, underground cable, pipelines, etc. – from cities and towns to the state Department of Revenue Administration.

The BIA and the bill’s sponsors argue, correctly, that local assessments are often unfairly high. The town of Bow, for example, has been in and out of court with Eversource and its predecessor, PSNH, for years over the assessed value of Merrimack Station. The town valued the coal-fired power plant at $159 million in 2013. Last year, Superior Court Judge Richard McNamara placed the value of the aged facility at $67.4 million.

Bow appealed, but before the high court could rule, Eversource agreed to sell Merrimack Station for $75 million. The sale price confirms that the plant was badly overvalued.

Municipalities levy excessive taxes on utilities, the BIA argues, because doing so lowers the bill for other taxpayers. When they do, it’s the utility’s customers, not its stockholders, who get stuck with the bill. The biggest energy users – manufacturers, ski areas, customers with a big office or campus – are hurt most.

The high price of power makes it hard for New Hampshire to attract or keep big energy users, who also tend to be major employers.

The BIA is right, but HB 324 is not the answer. Many questions are unanswered.

What precedent would this historic shift of power from city to state set? How much, if at all, are utilities being overtaxed by their host communities? We don’t believe anyone knows.

New Hampshire is a net exporter of electricity. That means that a portion of the higher electricity prices attributed to the excessive municipal assessments are, in some cases, being paid by customers in other states.

Is that unfair, or fair, if it means that a Boston suburb can avoid having its own power plant?

What would the transfer of assessing power to the state mean for local tax rates? Again, no one knows.

How many cities and towns could see tax revenue drop? Concord, according to the Revenue Administration website, assesses its utilities at nearly $160 million, Bow at $224 million, Franklin $36.6 million, Hopkinton $12 million, Tilton $20.5 million, Weare $22 million and Loudon $8 million.

What would happen if the state set the values at half or two-thirds of those amounts? A dramatic drop in values could conceivably devastate some communities long reliant on utility tax payments.

Utility assessments represent more than one-third of the total valuation of the city of Berlin. In the tiny North Country town of Dummer, population 307 in 2015, utility assessments, at more than $32 million, equaled the value of all other property in town.

Why allow the state to assess utilities – on the grounds that they are regulated entities – but not banks and other financial institutions, which are also regulated? Like utilities, gas stations, supermarkets and internet providers are necessities. Should the state assess them as well? Probably not, because, though the activities they engage in are regulated, the real estate they own is not. It can be sold on the open market. But now, so can power plants. Why should the state set their tax rates?

Is there a fairer way to assess the value of property that’s part of a regulated monopoly? What, after all, is the value of a mile of pipeline or poles and wires if they connect to nothing at either end? Should each town’s assessment be a fraction of the value of the entire pipeline or grid?

There are other inequities the bill fails to address.

Municipalities that host utilities get all of the tax benefits. None are shared with surrounding towns. That’s not true of pollution, for example. Thanks to prevailing winds, emissions from the Bow power plant, which seldom runs these days, tend to fall on Pembroke and Allenstown. That once led the state to warn asthmatic residents in those communities not to exert themselves outdoors when air quality fell.

In 2013, a letter writer from Pembroke wrote to say the pollution from the Bow plant was so bad that his dog had to use an inhaler. Would allowing the state to set assessments address such inequities? Again, no one knows.

HB 324 should be the start of a discussion of fair taxation, nothing more.