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HomeMy WebLinkAboutCOM 0480.003 1998-2000 Testimony before the County Council County of Hawaii December 1, 1999 by Warren Lee President, Hawaii Electric Light Company, Inc. Regarding Ordinance Bill No. 143 Amending Chapter 19 of the Hawaii County Code 1983 (1995 Edition), Relating to Real Pro~ert~f Tax Exemptions eK: vt~ Chairman Arakaki and members of the Council: ~ r my Council Good morning. My name is Warren Lee. I am president of Hawaii Electric Light Company, one of the utilities that would be adversely affected by Bill 143. This bill seeks to remove the real property tax exemption for utilities serving the County of Hawaii. Hawaii Electric Light opposes this measure because it will result in double taxation for utilities such as HELCO and result in higher rates for residents and businesses that are our customers. As you are aware, Hawaii Electric Light Company (HELLO) and its affiliates, Hawaiian Electric Company and Maui Electric Company, pay a Public Service Company tax (PSC tax) to the State of Hawaii in lieu of county real property taxes and the State general excise tax pursuant to Chapter 239, Hawaii Revised Statutes. In the past, HELLO, MECO and HECO have supported legislation at the state level that would forward to the counties the portion of the public service company tax related to real property taxes with the proviso that the real property tax exemption be maintained by the counties. We understand and support the County of Hawaii's desire to obtain its proportionate share of the PSC tax to make up for the real property taxes it is now exempting. Most recently, we testified in support of House Bill 1514, which proposed the transfer to the counties the amount of PSC tax revenues collected in excess of 4% of the utilities' gross income. A copy of our testimony is attached. We have testified in support of similar measures in other sessions of the legislature. Comm. No. • D0,3 File No. HCC/kpr Ref. 'ro:~~~~ eouNU~ Ref. Gate f1F[: 1999 I would like to clarify some statements that may have been made earlier that utilities like HELCO do not pay a franchise tax to the Counties. This is in error. In addition to the PSC tax of 5.885% paid to the State of Hawaii, HELCO pays 2.5% of its gross revenues to the County of Hawaii each year in franchise taxes as required by Hawaii Revised Statutes. These franchise taxes are paid for the use of the public rights of way. In 1998, HELCO paid $3.992 million dollars ($3,991,971) to the County of Hawaii in franchise taxes. We have already paid $3.870 million ($3,870,089) in 1999. It is our hope that the counties and the State can eventually agree on an equitable solution to this dilemma. However, until such time, it is unreasonable that HELCO should be assessed real property taxes at both the county and state levels. HELCO would be required to pass the cost of the County of Hawaii's real property tax to consumers. In addition, HELCO would be required to gross up the real property tax amount imposed by the County. This would be required to cover the increase in revenue-based taxes paid to the state and the County of Hawaii. Therefore, to cover the cost of the additional County real property taxes, our customers may pay approximately 2% more. Another item to consider, is the cost of administering a traditional real property tax on utilities. The history of the PSC tax indicates that the revenue-based tax was adopted because of the difficulty in evaluating and administering assessments on utility property, easements and rights of way. We would urge that the Council give careful consideration to the complexities of assessing the value of public utility property, and the costs, which will likely exceed the cost of administering arevenue-based tax. In summary, HELCO strongly opposes Bill 143 because revocation of the public utility real property tax exemption would result in a significant and unjustified increase in electricity rates for our customers and double taxation for the utilities. Instead, we urge you to continue to pursue sharing of the PSC tax revenue at the State legislature. We will continue to support any PSC tax revenue sharing proposal coupled with a County real property tax exemption. Thank you for the opportunity to offer our testimony on this matter. WRITTEN TESTIMONY BEFORE'I'SE COMMCT'TEE ON CONSUMER PROTECTION AND COMMERCE REGARDING H. B. T514 ' FEBRUARY 17,1999 By Lon Okada talc Manager • • Hawaiian I'slectric Indnatties, Inc. Chair Oshiro and Members of the Cottmtittee: lvly name ~ Lon Okada and I represent Hawaian Elecvic Industries, Inc. iHII) and its subsidiary i companies, including Hawaian Electric Compatry, Toe.. Maui ]:lectric Company, Ltd. and Hawaii Electric Light Coatpariy. Inc. I HEI supports, with reservations, Ii. B. 1514, which proposes the sharing of the Public Service Company (PSC) tax between the state and counties: H. B. 1514 proposes to transfer to the coumiea the amount of PSC taxes collected in excess of few percent of the public service . ' company's gross income. 5ach county would receive a portion of the excess based on the ' proportional con[nbution of ae[ual tax receipts geturated within each coumy. In order to prevent dnubk: taxation, however, it is important that a res[ric[ion is placed on the counties' ability to impose a real property tax on public service cotttpatries. The PSC tax was attacted in 1932 as a tax in lieu of all taxes, outer than income taxes, public utility fees and franchise taxes. The legislative history c1a[ifies the fact that the PSC tax was speciScally designated as a tax in lien of the real property tax and the general excise tax. In fact, the enactment appears to have been partly tnorivared by the complexity and practical difficulties of i identifyitrg and assessing the value of utility property such as easements. tights of way and joitttly used assets. These unique utility property tax problettu would be an assessor's nightmare and would generate admitristrative cosu far in excess of the cost of administering arevenue-based tax. Thus. fire revcmre-based Public Service Cottipany tax was created. "fhe 1978 Constitutional Conven[ion transferred all revenues and tesponsibr7ities for real property taxes to the counties. Because the PSC ux is not covered under the real property tax law, the counties curr•ertly dp not receive any portion of the PSC tax revemtes. In light of the IeYislative intent enacting dre PSC fox as a tax in lieu of the real property tax and [he general excise tax. is would be equitable tv share a portion of the PSC tax revenues with the counties to compensate them for the real property tax revenues they are trot receiving from the public serice companies. In summary, HEI believes the proposal le H. B. 1514 represenu a conceptually sound means of sharing wi[h the counties a portion of the PSC tax in lieu of the real property tax revtxtues that they currently do not receive from public service companies. However, it is important to also restrict the rnunties' ability to ittrpose a real property tax on publrc service companies. Sttclt a restriction will prevent double taxation onutility customers -once through the PSC tax and again through a real property tax. `tJe urge you to consider arrrending the bill accordingly.