$44 million tax break for utilities asked

Bills would link cut to deregulation of power companies

Proposal of 2 key legislators

Customers would pay for a third of break, phased in over 5 years

Deregulation

February 05, 1999|By Gady A. Epstein and Thomas W. Waldron | Gady A. Epstein and Thomas W. Waldron,SUN STAFF

Two top Maryland legislators are proposing a $44 million annual tax break for the state's power companies that would be linked to deregulation of utilities. The state government, counties and rate-payers would share the burden of the tax cut.

The legislation, which is expected to be introduced in the General Assembly today, would cost Baltimore City and the nine counties with power plants nearly $15 million a year, according to an analysis prepared by legislative staff members. Anne Arundel and Calvert counties would be hit the hardest.

If Maryland is going to move to a free-market electricity system, the state's utilities insist that they will need tax relief to compete with out-of-state electricity providers who are paying lower taxes.

Del. Sheila E. Hixson, chairman of the House Ways and Means Committee, said yesterday that she and Sen. Barbara A. Hoffman, head of the Senate Budget and Taxation Committee, would introduce the tax cut legislation.

"We feel that the bill we'll be putting in is fair, is balanced and will be good for the citizens of Maryland," said Hixson, a Montgomery County Democrat.

The proposal would give Maryland power companies a 60 percent tax break on their generating plants, phased in over five years, as part of a more comprehensive overhaul of utility taxes to prepare for deregulation.

Baltimore Gas and Electric Co., the state's largest utility, would reap about $24.5 million from the tax cut, according to a legislative analysis.

The state would reimburse the counties for two-thirds of their lost tax revenue. But counties such as Anne Arundel, Prince George's and Calvert would lose several million dollars in tax revenue annually.

For Calvert, a small county, the loss would roughly equal one year's growth in its total budget, according to an official with the Maryland Association of Counties. A third of the cost of the tax break also would be passed on to rate-payers.

BGE officials said yesterday that they could not comment on specifics in the legislation, but stressed that tax relief must be included in any deregulation effort.

"If I have generating taxes that are higher than in neighboring states, which I do, my costs are going to be too high and I'm going to be uncompetitive," said Edward Stoltz, BGE's tax expert.

Gov. Parris N. Glendening has yet to be convinced that the electric utilities need a tax break. He expressed objections to the tax cut idea earlier this week, arguing that the money is needed for schools and other services.

Maryland's counties, which would stand to lose millions of dollars in revenue if the law is enacted, are likely to lobby for changes in the bill on much the same reasoning.

"It's a tax cut that I think compromises both the state's and local government's ability to provide important services, such as education and public safety," said Michael Sanderson of the Maryland Association of Counties.

He said any tax relief for the utilities should come in the form of state tax credits that protect the local governments.

No tax cut would take effect until Glendening and the General Assembly approve a deregulation bill, which is iffy at this point.

Pub Date: 2/05/99

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