Utilities shouldn’t get property tax breaks
I was very surprised to read New Hampshire’s Consumer Advocate recent call to increase property taxes across the Granite State. In all fairness to Mr. Kreis, he did not specifically use those words, but the end result of his recommendation to the NH Legislature would result in millions of increased property taxes for local taxpayers.
Under the headline, “It’s Ratepayers Who Pay Utilities’ Property Taxes,” (April 14-27 NH Business Review), Consumer Advocate D. Maurice Kreis described his support for House Bill 324, which would require all municipalities to utilize the valuation established by the NH Department of Revenue Administration for the purposes of a statewide utility tax as the valuation also to be used for local property taxes.
With the campaign slogan, “Utilities don’t pay property taxes. Utility customers pay them,” Mr. Kreis opines all consumers would be better off by utilities paying a lower property tax bill as they would realize a lower utility bill as a result.
Unfortunately, what Mr. Kreis fails to report is the fact that if one class of property owner is given some sort of reduction in their property valuation, the burden of the reduced valuation is shifted to the remaining classes of property owners to bear. Which means residential, commercial and industrial properties will be forced to pay the difference shed by the utility properties.
The DRA utilizes the “unit method” to determine a single value for the entire statewide business of a utility, rather than valuing separately the components or the properties in individual municipalities.
This is done based on information provided by the utilities. Once DRA calculates a utility company’s property using the unit method, it allocates the total appraised value among the municipalities solely for the purpose of equalization.
Public utility companies are subject to a statewide tax on their properties under RSA 83-F. This is in lieu of their paying the statewide education property tax that other property taxpayers pay. Under RSA 83-F, the DRA is responsible for appraising utility property, solely for the purpose of the utility property tax. It is very clear that it is not DRA’s duty, but that of the local municipality, under RSA 75:1, to “appraise … all … taxable property at its market value,” for general property taxation.
The unit method has been found to be an acceptable approach by the NH Supreme Court. But the court has also held it is not the only acceptable approach and is not required to be used by municipalities, largely due to the different nature of the assessments.
In many recent decisions, the Superior Court and the Board of Tax and Land Appeals have strongly rejected challenges by Eversource and the NH Electric Cooperative to their assessments in approximately 70 municipalities. In each case, a detailed opinion was issued in which the local assessments were found to be more credible than the utilities’ or DRA’s appraisals. The BTLA’s criticism of the DRA appraisals noted DRA did no appraisal of the property in any given town and did not even know what property was in each town. The utilities have appealed the BTLA decisions to the NH Supreme Court, where the case was heard in January.
As presented, quite simply, HB 324 would shift billons of property valuation and increase property taxes on all non-utility properties across the state. In Auburn in 2016, utility property was determined by DRA to be valued at $5,775,307. However, the town’s assessor valued the utility property at $7,992,700 – a $2,217,393 difference that is currently in the town’s net assessed valuation.
Should HB 324 be adopted, the loss of $2,217,393 in assessed valuation, assuming all other factors are equal, would result in a property tax rate increase of 7 cents on all Auburn taxpayers. For a homeowner with property valued at $300,000, that means an additional $21 in property taxes. For a $400,000 property, it would mean an additional $28. For commercial or industrial property with higher values than that, the increase would be even greater.
With Granite State municipalities, school districts and counties funded through the property tax, this is very simply a matter of fairness where property valuations need to be fair and equitable among all classes of property owners.
HB 324 as presented and supported by Mr. Kreis does not accomplish that.
Bill Herman is the town Administrator of Auburn.