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Home My WebLink AboutBIL 276 Draft 03 1998-2000 COUNTY OF HAWAII STATE OF HAWAII BILL NO. 2 ~ 6 (Draft 3) ORDINANCE NO. AN ORDINANCE AMENDING CHAPTER 19, OF THE HAWAII COUNTY CODE 1983 (1995 EDITION), RELATING TO REAL PROPERTY TAXES. BE IT ORDAINED BY THE COUNCIL OF THE COUNTY OF HAWAII: SECTION 1. The County Council deleted the public utilities tax exemptions in Ordinance No. 99-159. The County has been pursuing revenues from the State that are collected by the State through the public service company tax, a portion of which is collected based on the language of the statute, collected in lieu of real property taxes. The State's position is that the real property tax portions of the public service company tax are repealed and the County had no standing since it had never attempted to tax the utilities. In order to tax the utilities in an orderly and equitable fashion, the following method of valuation should be followed. In addition, the State, County and utilities are poised to settle this matter and turn the taxing power of the public utilities over to the County. In order to expedite an orderly assessment and collection process while facilitating those settlement discussions, a percentage of the public utilities' gross income as set forth in subsection (d)(1) below may be paid in the alternative by the utilities in lieu of the assessment method as set forth in subsections (a), (b) and (c) below. SECTION 2. Chapter 19, article 7, of the Hawaii County Code 1983 (1995 Edition), is amended by adding a new section to read as follows: "Section 19-53.1. Valuation of public utilities. u Notwithstanding any section to the contrary, the director of finance, in determining the market value assessment of the property of the public utilities, may use the values for real rororoertv as set forth in the annual financial reports of the public utilities as filed with the Public Utilities Commission, pursuant to chapter 269, Hawaii Revised Statutes, as the basis for the director's assessment, which shall be deemed prima facie correct. Due to the unique nature of the~ublic utility and its equipment assissment of values to individual tax map keys is not required. ~b For the purooses of this section, the following definitions are also adopted: Public utilities. Public utilities are as defined in section 269-1, Hawaii Revised Statutes. -1- L2,~ Outside plant. Outside plant is public utility real property, predominantly production, transmission, collection, switching, and distribution facilities, that may consist of one or more of the following: Units that have physical and functional characteristics that are so similar that they are accounted For as a croup or class and are eg nerally installed on easements. Transmission cable, wire or pipes, including supgort or conduit structures. Substation equipment. Measuring and re ug lating equipment. Ir Generation equ~ment. Storage equ~ment. Switching eauipment. Plant. Structures. Public utility real proroertv improvements that are not outside rolant, such as buildings, generating stations, production plants, ag s compressor stations, boilers, switchingplants, dams and reservoirs, circuit equipment, radio systems, terminals, satellite facilities, storage, wells, pumping facilities, and including those items which aze included in the outside plant definition above. u Property. Property is the same as defined in section 19-53, Hawaii County Code. j~ Valuations aze determined as follows: Land. Land values are determined by the mazket value approach in accordance with section 19-53, Hawaii County Code. Public utility real pronertv eg nerally classed as outside plant, as set forth in section 19-53.1(b~(21, including but not limited to, production, transmission, collection, switching or distribution substation equipment or measuring, regulating, generation, storage or switching equipment or improved property appraised on the basis of its reproduction cost new less allowances for ph s} ical depreciation functional obsolescence and economic obsolescence, if any. The r~roduction cost new is determined by multiplying reported inventor}_original cost by arororororiate price indices and/or by multinlyingphvsical inventories by appropriate unit prices. The rate of depreciation is a function of the appraised property age estimated service life and salvage factor. Such determinations and assessments of fair mazket value shall be made, to the extent possible, in -2- accordance with the annual financial reports as filed with the Public Utilities Commission pursuant to chanter 269, Hawaii Revised Statutes. which shall be deemed prima facie correct. For all lands of public utilities not categorized by section 19-53(al. Hawaii County Code, said improvements shall be taxed at a rate assigned to the industrial classification. Plant. Structure. The value of improvements that are plant or structure as set forth in section 19-53.1(bl(3), includine but not limited to, buildings, generating stations, ag s compressor stations, switching plants, dams and reservoirs, circuit etc uinment, radio systems, tenninals, satellite facilities. storage, wells, and aumping stations, is determined using, the same methodology as is used in auoraising outside plant prouerties. For the purpose of liens and foreclosure, anv outside plant property shall be considered a part of anv system or plant to which it is a Hart of and to which a tax map key has been assigned. In lieu of the assessment method as set forth in subsections (al. (bl and (c, above, a public utility except airlines, motor carriers, common carriers by water or contract carriers taxed by section 239-6, Hawaii Revised Statutes, maypav the County a real propertv tax of such rate per cent of its gross income each yeaz from its public utility business as shall be determined in the manner hereinafter provided. The tax imposed by this section is a means of taxing the real property owned by the public utility or leased to it by_a lease under which the public utility is required to pay the taxes upon the propertv. For the purposes of this section. gross income and net income shall have the respective meanings given those terms in Hawaii Revised Statutes chapter 239; provided that such gross income and net income is from uublic utility business within the County of Hawaii. The rate of the tax upon the gross income of the public utility shall be determined as follows: If the ratio of the net income of the company to its gross income is fifteen percent or less, the rate of the tax on Bross income shall be 1.885 percent; for all companies having net income in excess of fifteen percent of the gross, the rate of the tax on gross income shall increase continuously in proportion to the increase in ratio of net income to gross, at such rate that -3- for each increase of one percent in the ratio of net income to gross, there shall be an increase of .2675 percent in the rate of the tax. The following formula maybe used to determine the rate, in which formula the term "R" is the ratio of net income to gross income, and "X" is the required rate of the tax on gross income for the utilit,} in question: X=(26.75R - 2.1275)%: provided that in no case governed by the formula shall "X" be less than 1.885 percent or more than 4.2 percent. Provided further that in no case shall the application of the above rate or formula by the County, when added to the amount of real property tax levied and assessed by the other counties using the same formula in their county ordinances, result in a combined statewide real property tax liability which is greater than that portion of the tax liability that would have been savable by the public utility under Hawaii Revised Statutes chapter 239 (as codified on August 1, 20001 in excess of 4%. u The public utilities may elect to utilize the method of assessment under subsection (dl(1) rather than the method of assessment under subsections (al. (bl and (cl by filing_a notice of such election on or before December 31 of the year immediately preceding when the tax would be due with the director of finance: provided. however, that for the first tax year after the effective date of this ordinance, the public utilities may file such notice on or before May 31, 2001. If the State of Hawaii amends Hawaii Revised Statutes chapter 239 to decrease the tax levied thereunder to a maximum rate of four percent (4%l, the director of finance shall utilize the method of assessment under subsection (dl(Il rather than the method of assessment under subsections (al, (bl and without a request from the public utilities to do so. As the basis for calculating the public utility's gross income and net income, the Countv shall accept the public utility's filinn for gross income and net income from public utility business within the Countv of Hawai' i as made to the State of Hawaii pursuant to chapter 239 Hawaii Revised Statutes. If a public utility has not allocated its gross income and net income on a count ~}_bv-county basis, the counties together with that public utility. shall a rg ee upon a method by which such income can be allocated amongst the counties." -4- SECTION 3. Material to be repealed is bracketed. New material is underscored. In printing this ordinance, the brackets, bracketed material and underscoring need not be included. SECTION 4. If any provision of this ordinance, or the application thereof to any person or circumstance, is held invalid, such invalidity shall not affect other provisions or applications of the ordinance which can be given effect without the invalid provision or application, and to this end, the provisions of this ordinance are declared to be severable. SECTION 5. This ordinance shall be effective January 1, 2001. INTRODUCED B~Y: L~V: CIL MEMBER, COUNTY O HAWAII Hilo, Hawaii Date of Introduction: Date of 1st Reading: Date of 2nd Reading: Effective Date: REFEREAfCF: Comm. $13.015 -s-