Senate bill would reduce property taxes for utilities

Jun 7, 2018

A bill in the Michigan Senate would exempt new utility distribution lines and storage equipment from property taxes.

Groups in opposition of the bill say it could hurt local municipalities.

A bill analysis says as utility infrastructure is updated, more of it would become property tax exempt - leading to reductions in state and municipal revenue over time.

Chris Hackbarth is with the Michigan Municipal League. He said the bill would reduce basic services.

“If you try and take that money out of local governments you will impact the ability to keep your bridges safe, to fill potholes, to ensure that you don’t have sewer or water main breaks.’

Republican State Senator John Proos is a bill sponsor. He said it wouldn’t take money from municipal budgets - rather it would ensure that future utility investments don’t impact ratepayers.

“The property taxes aren’t paid by the energy companies themselves the property taxes are paid by us the ratepayers in a rate-setting manner. So that’s why I don’t want to see our rates go up as these energy companies continue to increase our reliability in better distribution systems.”

Proos said he wants a discussion about who should foot the bill for utility investment.

“So let’s be clear about what we’re doing. We’re asking our ratepayers to pay increased costs for reliability and then allow our tax structure to pay municipalities for that right to increase reliability for each and every one of us.”

Proos said those costs can’t be put on utilities because it would “destabilize reliability.”

Hackbarth said local governments still haven’t recovered from the recession and this takes away critical funding.

“Depending on the community you’re talking about this utility could make up 50% of the tax base for a local community. So if you wipe out or create a glide path to phase out 50% of their tax base how do you keep your police officers?”

Hackbarth said roughly 75% of local government funding comes from state shared revenue and property taxes - and this bill would hurt a major source of local revenue.