HomeMy WebLinkAboutCOM 0813.003 1998-2000
Hawaii Electric Light Company, Inc. • PO Box 1027 • Hilo, HI 96721-1027
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July 25, 2000
Warren H, W. Lee, P.E.
President
Chair Aaron Chung
and Members of the Finance Committee
County Council
County of Hawai'i
25 Aupuni Street
Hilo, Hawai'i 96720
Re: Proposed Ordinance for Real Property Taxation of
Public Utilities (Bill No. 276)
Dear Chair Chung and Members of the Finance Committee:
Thank you for giving Hawaii Electric Light Company ("HELCO") the
opportunity to comment on the above proposed ordinance, which
was sent to you under cover letter dated June 9, 2000, from the
Office of the Corporation Counsel. Our comments are made without
prejudice to the positions we have taken in the pending tax appeals
and are limited to the major issues raised by the bill.
The proposed ordinance compounds the damage done by the
amendment of section 19-89 of the Hawai'i County Code in
December of last year. That ordinance denied public utilities the
long-standing exemption from taxation of real property. The result is
that public utilities are now the only taxpayers in the county whose
real property is subject to double taxation the real property tax
payable to the County and the Public Service Company ("PSC") tax
(which by its express terms is "in lieu of real property tax") payable to
the State. Q yy
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Chair Aaron Chung
and Members of the Finance Committee
July 25, 2000
Page 2
The proposed ordinance compounds the injustice of double taxation
of public utilities by taxing not only real property, but also personal
property. Section 19-1 HCC makes it clear that the County is
empowered to assess and collect only a real property tax, not a tax
on personal property. The limitation of the real property taxing
authority is confirmed in the definition of "real property" and
"property" in section 19-2(a)(3) HCC, which clearly limits "property" to
mean "land and appurtenances."
Despite the limitation on the County's power to tax property, the
proposed ordinance purports to allow the County to tax the public
utilities' personal property as well as real property. The ordinance
would allow valuation of public utilities' property based on "annual
financial reports of the public utilities as filed with the Public Utilities
Commission," even though those reports include values for not only
real property, but also personal property and services.
The illegality of the proposed scheme for taxation of utility real
property only demonstrates the difficulty of properly administering a
tax on utility real property. We respectfully suggest that a far more
effective solution would be to work with the State of Hawai'i to obtain
a portion of the PSC tax, as was proposed in the bill that the utilities
presented to the Legislature during the last legislative session. This
would enable the County to obtain funds without going through the
administrative burden of devising and implementing a proper system
for taxing utility real property. It would also eliminate the double
taxation problem, thereby relieving the rate paying citizens of the Big
Island from the burden of higher rates. As you know, increases in
the tax burden imposed on public utilities are ultimately borne by the
utilities' customers.
HELCO is willing to work with both the County and the State to bring
about a settlement that meets the needs of all the parties. To that
end, HELCO is giving serious consideration to the County's request
Chair Aaron Chung
and Members of the Finance Committee
July 25, 2000
Page 3
that the utilities commence payment of the Public Service Company
tax "under protest" into the litigated funds account, as provided by
section 40-35 of the Hawaii Revised Statutes. Such a course of
action requires the filing of a complaint against the State in Tax
Appeal Court, thereby facilitating in bringing the parties (State,
County and utilities) together under the aegis of the Tax Appeal
Court for settlement discussions on a tax-sharing mechanism that
would enable the County to receive a portion of the PSC tax from the
State in lieu of collecting real property taxes.
For these reasons, we urge the Committee to hold the Bill No. 276 in
committee and to pursue instead a settlement with the State.
HELCO would be glad to assist in that process.
Thank you again for the opportunity to provide you with our
comments on the proposed ordinance.
Sincerely,
i QU
arren H. W. Lee
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