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HomeMy WebLinkAboutCOM 0813.010 1998-2000 TESTIMONY OF HAWAII ELECTRIC LIGHT COMPANY IN OPPOSITION TO BILL NO. 276 August 8, 2000 Good morning, Chair Chung and members of the Finance Committee. I am Mark Gushiken, Land Administrator for Hawaii Electric Light Company ("HELCO"). I am presenting comments today on behalf of Warren Lee, President of HELCO. Thank you for the opportunity to testify on Bill No. 276, An Ordinance Amending Chapter 19 of the Hawaii County Code 1983 (1995 Edition), relating to Real Property Taxes. 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. HELCO strongly opposes Bill No. 276 and respectfully urges the Committee to hold this bill, for the following reasons: 1. County taxation of the real property of public utilities results in unconstitutional double taxation. 2. The method proposed in Bill No. 276 for assessment of utility real property would result in unlawful taxation of both real and personal property of public utilities. 3. The proposed ordinance will result in an increase in the financial burden on your constituents, as any increase in taxation of public utilities will ultimately be passed on to our customers in the form of higher utility bills. As this Committee has already heard, 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. Direct assessment by the County of real property taxes against public utility property, without any corresponding change in the PSC tax, results in double taxation of public utilities. Furthermore, this bill proposes an unlawful method of assessing taxes against utility real property. Under the guise of a real property tax, it attempts to tax the personal property and other non-real property assets of the public utilities. However, the County does not possess the authority to tax those assets. As HELCO previously testified to this Committee, the Hawaii State Constitution limits the counties to collection of a real property tax (not a personal property tax) from the public utilities, a limitation that the Hawaii County Code expressly recognizes. Yet the proposed ordinance, by allowing valuation of public utilities' property based on "annual financial reports of the public utilities as filed with the Public Utilities Commission" even though Comm. No.ou-3• 0/9) File No. Ref. To: G _ A Ref. Date UG 1 U Z those reports include values for not only real property, but also personal property and services would have the County taxing the public utilities' personal property as well as real property. In addition, the proposed ordinance imposes a heavy financial burden on your constituents, our customers. As a rough estimate, assessment of real property taxes as proposed in Bill No. 276 would add an additional $59 annually on average to the bill for each of our customers. This additional dollar impact is calculated based on the County's attempted assessment of HELCO property in April of this year using HELCO's annual financial report filed with the Public Utilities Commission. As you know, increases in the tax burden imposed on public utilities are ultimately home by the utilities' customers, who are also your constituents. The illegality and financial burden imposed by the proposed scheme for taxation of utility real property only demonstrate the difficulty of properly administering a tax on utility real property. HELCO respectfully urges the County instead to work with the State of Hawaii 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, and would avoid the double taxation problem. HELCO has demonstrated its willingness to work towards a settlement of this issue. HELCO has agreed to the County s request that the utilities commence payment of the PSC tax "under protest" into the litigated funds account, as provided by section 40-35 of the Hawaii Revised Statutes. Beginning with its August 10 PSC tax payment, HELCO will pay the PSC tax "under protest" to the State. HELCO is also willing to meet with the County and the State to discuss ways of resolving the issue without double taxation of public utilities. 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 cooperate in that process. Thank you again for the opportunity to provide you with our comments on Bill No. 276.