Utilities would pay property taxes based on plants’ output

Communities that rely on property taxes from electrical plants would see more stable revenue from a proposed change to how facilities’ market values are determined.

HF1985, sponsored by Rep. Greg Davids (R-Preston), would set values based on the plant’s capacity and how much electricity they actually produce. The House Job Growth and Energy Affordability Policy and Finance Committee approved HF1985 Monday, sending it to the House Taxes Committee. HF1985 has no Senate companion.

Under Minnesota’s current property tax system for electric plants, the bulk of a utility’s property taxes are levied on a facility and its equipment, rather than real property or land. That can lead to fluctuations in tax revenue for the city or county where the plant is located, as equipment depreciates or new investments are made.

WATCH Full video of committee discussion on the bill 

“We have struggled back and forth with communities that host our largest assets as they watch their revenues go up and down … as opposed to a real property tax,” said Rick Evans, director of regional government affairs at Xcel Energy. “This bill is an attempt to put taxes on a more stable and predictable and more easily administered method.”

The bill would also phase out exemptions to the property tax as contracts expire. Wind and solar energy facilities aren’t included in HF1985.

Evans said the bill would have no net effect on the amount of property taxes Xcel pays in Minnesota. But under the system proposed in HF1985, some communities could see property tax revenue from a local plant go down. For others, it could go up.

The state would ease any such losses through a new fund proposed in the bill. “There shouldn’t be winners and losers,” Davids said. “We’re taking away the peaks and the valleys.”

The committee also laid over, as amended, another Davids-sponsored bill, HF1497, that would create new rebates for owners of geothermal heat pumps of energy storage, wind energy conversion, or solar thermal systems. The companion, SF1174, sponsored by Sen. Jeremy Miller (R-Winona) awaits action by the Senate Energy and Utilities Finance and Policy Committee.