Some decry plan to end tax breaks for utilities

County officials concerned about revenue next year

February 08, 2002|By Lynn Anderson | Lynn Anderson,SUN STAFF

Upset with a plan by Gov. Parris N. Glendening to end a multimillion-dollar tax break for utility companies that provides grants to some counties, electric industry officials and county administrators found themselves allies in Annapolis yesterday.

The two groups sought assurance from members of the House Ways and Means and Environmental Matters committees that the programs - devised in 1999 as part of the state's electricity deregulation package - will continue for at least another year.

Three years ago, state officials said they would review the tax-break and grant program in 2003, but now program supporters say that Glendening is dumping that plan and rushing ahead of schedule.

"This couldn't have come at a worse time," said Ed Stoltz, managing director of accounting and tax for Constellation Energy Group Inc., the parent company of Baltimore Gas and Electric, which saved $30 million in property taxes last year through the program. "It will place an extraordinary burden on our industry."

County officials - Anne Arundel, Calvert, Charles and Prince George's counties are the most vulnerable - are feeling edgy as well. They worry that without the tax break, power companies will falter and leave the state, taking much-needed jobs and tax revenue with them.

Or, they fear that lawmakers might give in to the power companies, but do away with local grants to offset the tax breaks. The grant program is worth about $30.6 million to 11 counties.

"This is very, very important to us," said Thomas Himler, deputy director of the office of management and budget in Prince George's County. "We can't absorb an $8 million hit."

Anne Arundel County officials also have complained about the governor's plan, but they face a unique predicament.

If the power plants' tax breaks are eliminated, that would generate additional property tax revenue and a voter-imposed tax cap would force the county to lower the property tax rate for all property owners. It's a scenario that vexes budget officials who are forecasting a $20 million budget shortfall during the fiscal year that will begin July 1, and who didn't count as property tax revenue the state grants offsetting the tax breaks.

Recently, Glendening promised County Executive Janet S. Owens that his budget reconciliation act - legislation that is necessary to end the tax break and grant programs - would allow the county to collect new property tax revenue but not count it toward the tax cap.

Anne Arundel County Budget Director John R. Hammond kept his testimony simple, and in line with other county requests.

"We have been counting on this in all our budget projections," Hammond said during yesterday's briefing, referring to an $8 million grant the county expects to receive from the state in 2003.

Prince George's also has a tax cap, but it is not revenue-based.

In Calvert and Charles counties, officials are worried about taking a large financial loss should the grant program be discontinued.

Calvert Cliffs, a nuclear power plant located in southern Calvert County, is that jurisdiction's largest source of property tax income, or about 6.1 percent of the total revenue budget, said Terry L. Shannon, director of the department of administration and finance.

When lawmakers inked an agreement with energy companies to give them the tax break, Calvert lost $8.3 million in revenue, Shannon said. Grant money, about $6.1 million, wasn't enough to cover the loss.

Shannon said she wants the state to continue with the tax break and grant program to keep a recently deregulated market competitive.

Constellation officials said yesterday that the tax break helps them to moderate costs. Without it, electricity costs for consumers could increase.

Another industry representative, Pepco executive William J. Sim, said that a change in the deregulation legislation would "send a very strong message to new generators not to locate in Maryland and to existing generators to leave." And it would be more difficult for distributors like his to secure long-term, fixed-price contracts. "Policies that discouraged generation and increased price volatility ... caused the implosion of electricity markets in California last year," he said. "I urge you not to repeat those mistakes in Maryland."

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