ST. PAUL -- Minnesota communities facing sharp declines in tax base found a sympathetic ear from Senate Taxes Committee members.
Communities that host the state's largest electricity generating plants -- Red Wing, Monticello and Becker -- anticipate significant losses in property tax revenue from an impending Revenue Department rule change.
Last week, a state judge ruled in favor of a change in valuation rules that will reduce the amount of property taxes utility companies must pay to local taxing districts.
"Meanwhile," Sen. Steve Murphy, DFL-Red Wing, told committee members Wednesday, "our residential homeowners are going to get stuck footing the bill."
While observers expect the rule change to take hold in coming months, that didn't stop leaders from some of the affected communities from urging lawmakers to fight back through legislation that aims to recoup much of the tax base expected to be swept away by the rule change.
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A bill sponsored by Murphy would increase tax rates for utility companies.
"We took the risks. We entered into the agreements. We need some benefit," Red Wing City Council President Carol Duff said at Wednesday's committee hearing.
Red Wing and Goodhue County host Xcel Energy's Prairie Island Nuclear Plant, which is among the companies poised to receive the tax breaks.
The city has seen a gradual decline in tax revenue from the utility. When the plant opened in the 1970s, officials agreed to pay great sums in property taxes since Red Wing leaders agreed to accept the risk of nuclear power.
Under the Revenue Department rule change, Red Wing's residential property taxes would have gone up almost 7 percent without a stabilization agreement inked between the city and the utility. The agreement calls for Xcel to reimburse Red Wing and Goodhue County for 10 years with the revenue lost had the rule change not gone into effect.
But that agreement hasn't appealed to other communities. About $754,000 in lost tax base will be shifted onto residential taxpayers in his city, Becker Mayor Ken Paulson said at the hearing.
Xcel officials defended the upcoming rule change, calling it "an anticipated correction in valuation."
"Any relief we get in tax reduction," said Joe Rheinberger of Xcel's tax department, "...will be passed on to ratepayers."
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Sen. Rod Skoe, DFL-Clearbrook, told testifiers from affected communities that "we understand the shift that is going on." He said Murphy's bill will be considered for a larger tax bill later in the legislative session.
Sen. Tom Bakk, DFL-Cook, told state Revenue Commissioner Ward Einess that he'd like to see Gov. Tim Pawlenty's support for Murphy's bill. That is, Bakk said, "if his administration is going to impose rules like this that will have severe impacts" on communities.
Einess said Pawlenty "was concerned" about the impact the rule change will have on cities.
Mike Longaecker works for Forum Communications Co., which owns the Bemidji Pioneer.
