CHAPTER 117
HB 700 - FINAL VERSION
19Mar2019... 0960h
8May2019... 1779-EBA
2019 SESSION
19-0195
10/05
HOUSE BILL 700
AN ACT relative to valuation of utility company assets for local property taxation.
SPONSORS: Rep. Abrami, Rock. 19; Rep. Moffett, Merr. 9; Rep. Barry, Hills. 21
COMMITTEE: Ways and Means
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ANALYSIS
This bill establishes a methodology for the valuation for property tax purposes of electric, gas, and water utility company distribution assets within each town or city. The methodology is phased in over a 5-year period. This bill is a request of the commission to study utility property valuation and recommend legislation to reform the current system of taxing utility property in New Hampshire, 2018, 234 (HB 324).
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
19Mar2019... 0960h
8May2019... 1779-EBA 19-0195
10/05
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Nineteen
AN ACT relative to valuation of utility company assets for local property taxation.
Be it Enacted by the Senate and House of Representatives in General Court convened:
I. For at least 40 years, New Hampshire has struggled to define and/or provide with a unified approach how municipalities should assess properties owned by regulated utilities which include electricity, gas, and water. During these years New Hampshire municipalities and utility companies have been engaged in expensive and time-consuming litigation over different methods of valuing utility company assets for purposes of local property taxation. The courts have allowed up to 5 different methodologies for appraising utility company assets, and our statutes allow appeals by the taxpayers either to the board of tax and land appeals or to the superior court. The result has been that similar utility company assets are valued for local property taxing purposes at significantly different and inconsistent values, even in adjoining municipalities. This litigation has been a financial burden on the respective sides ultimately borne by the utility ratepayers and the municipal taxpayers, who are often the same people in any given town.
II. Some states have legislated a uniform methodology or approach to this issue. However, the New Hampshire legislature has been mired in parochial politics over this issue for decades. The New Hampshire court system has suggested through its opinions that a legislative fix is required. For decades, the New Hampshire supreme court has noted that the process of determining the fair market value of utility company assets is a difficult and inexact process, as in one case colorfully written in an opinion that the process is “akin to a snipe hunt carried on at midnight on a moonless landscape,” Appeal of Pennichuck Water Works, 160 N.H. 18, 37 (2010); see Public Service Company of N.H. v. Bow, 170 N.H. 539, 542 (2018). Moreover, the Court has long noted that this is a problem for the legislature to fix: “the decision to adopt such a uniform methodology belongs to the legislature, not this court,” Appeal of Public Service Company of N.H., 170 N.H., 87, 105 (2017); Southern N.H. Water Co. v. Town of Hudson, 139 N.H. 139, 142-143 (1994).
III. The recommendations of the commission to study utility property valuation and recommend legislation to reform the current system of assessing utility property in New Hampshire, established in RSA 72:12-e, published its final report on November 1, 2018 and are the basis for the language in this act. The focus of the commission and of this act was and is on regulated public utilities regulated by the public utilities commission and deregulated electric cooperatives and excludes all generation and Federal Energy Regulatory Commission (FERC) regulated transmission properties.
117:2 New Sections; Valuation of Electric, Gas, and Water Utility Company Distribution Assets. Amend RSA 72 by inserting after section 8-c the following new sections:
72:8-d Valuation of Electric, Gas, and Water Utility Company Distribution Assets.
I. In this section:
(a) "FERC" means the Federal Energy Regulatory Commission.
(b) "Utility company assets" means the following property not exempt under RSA 72:23:
(1) For an electric company providing electricity service to retail customers: the distribution poles, wires, conductors, attachments, meters, transformers, and substations accounted for by the utility in accordance with FERC Form 1, buildings, contributions in aid of construction (CIAC), construction works in progress (CWIP), and land rights, including use of the public rights of way, easements on private land owned by third parties, and land owned in fee by the electric company, so long as such easements and fee land are associated solely with distribution power lines classified as distribution according to FERC standards.
(2) For a gas company providing gas service to retail customers: distribution pipes, fittings, meters, pressure reducing stations, buildings, contributions in aid of construction (CIAC), construction works in progress (CWIP), and land rights including use of the public rights of way, easements on private land owned by third parties, and land owned in fee by the gas company.
(3) For a water company providing water service to retail customers: pipes, fittings, meters, wells, pressure/pump stations, buildings, contributions in aid of construction (CIAC), construction works in progress (CWIP), and land rights including use of the public rights of way, easements on private land owned by third parties, and land owned in fee by the water company. No electric power fixtures employed solely as an emergency source of electric power in a public water distribution system shall be taxable.
(c) "Utility company assets" shall not include:
(1) Electric company transmission poles, wires, conductors, attachments, meters, transformers, and substations, classified as transmission according to FERC standards, buildings associated with transmission, and land rights, including easements on private land owned by third parties, and land owned in fee by the electric company, so long as such easements and fee land are associated with transmission power lines classified as transmission according to FERC standards.
(2) Electric generation facilities and associated land rights, whether in fee or by easement.
(3) Gas transmission pipeline facilities regulated by FERC and associated land rights, whether in fee or easement.
(4) Wholly owned telephone, cable, or Internet service providers, and large scale natural gas and propane gas liquid storage and processing facility assets.
(5) Fee-owned land, office buildings, garages, and warehouses.
(d) “Retention dam” means a dam constructed for the purpose of impounding drinking water supply.
II.(a) The selectmen or assessors shall appraise utility company assets lying within the limits of the town or city using a unified method of valuing the utility company assets, excluding land rights, according to the following formula:
(1) For electric and gas utility company assets: a weighted average of 70 percent of each asset's original cost and 30 percent of each asset's net book cost as reported in compliance with paragraphs IV and V.
(2) For water utility company assets: a weighted average of 25 percent of each asset's original cost and 75 percent of each asset's net book cost as reported in compliance with paragraphs IV and V.
(b) To the appraisal under subparagraph (a), for the use of public rights of way and private distribution system easements, the selectmen or assessors shall add 3 percent of the valuation determined under subparagraph (a).
(c) The total of subparagraphs (a) and (b), as implemented under paragraph VI, shall be the valuation of the utility company's assets for purposes of local property taxation, and added to the municipality's assessed value of the utility company's fee-owned land, office buildings, garages, and warehouses.
III. Any water utility company land parcel owned in fee for sanitary radii, retention dams, and/or watershed protection purposes which is subject to regulation by the department of environmental services to protect water quality shall be entitled to be assessed under RSA 79-C at the value such land would have been assigned under the current use values established pursuant to RSA 79-A if the land had met the criteria for open space land under that chapter, even if said parcel is less than 10 acres in size and/or has a well structure and related piping on the parcel.
IV. Each utility company shall report by May 1 of each year to the selectmen or assessors of each town or city in which its utility company assets are located and to the department of revenue administration, the original cost and net book value as of December 31 of the preceding year of each account code category of distribution, transmission, and generation assets, if any, located within such town or city in accordance with FERC Form 1 and/or Form 2 Federal Account Code items.
V. The commissioner of the department of revenue administration shall adopt rules under RSA 541-A for the forms and requirements for the reporting under paragraph IV. Such reporting requirements shall also include an obligation on the utility company with utility company assets to utilize an accounting system to report and track with the best information available, in an efficient, equitable and transparent manner using the best information then available from the utility company's accounting records, contributions in aid of construction (CIAC), construction works in progress (CWIP), and undistributed plant assets in each town or city and the original cost of each such asset as reported by the contributing entity.
VI.(a) The assessed value of all utility company assets existing and assessed as of April 1, 2018 determined in subparagraph II(c) shall be implemented over a 5-year period as follows:
(1) The value for assessment of property taxes for the tax year effective April 1, 2020 shall be a weighted average of 80 percent of the final locally assessed value effective April 1, 2018 and 20 percent of the apportioned value determined under subparagraph II(c) effective April 1, 2020.
(2) The value for assessment of property taxes for the tax year effective April 1, 2021 shall be a weighted average of 60 percent of the final locally assessed value effective April 1, 2018 and 40 percent of the apportioned value determined under subparagraph II(c) effective April 1, 2021.
(3) The value for assessment of property taxes for the tax year effective April 1, 2022 shall be a weighted average of 40 percent of the final locally assessed value effective April 1, 2018 and 60 percent of the apportioned value determined under subparagraph II(c) effective April 1, 2022.
(4) The value for assessment of property taxes for the tax year effective April 1, 2023 shall be a weighted average of 20 percent of the final locally assessed value effective April 1, 2018 and 80 percent of the apportioned value determined under subparagraph II(c) effective April 1, 2023.
(5) For each of the years in subparagraphs (a)(1) through (4), all utility company assets installed after April 1, 2018, and not included in assessment as of April 1, 2018, shall be assessed at the apportioned value determined under subparagraph II(c) effective as of April 1 of the property tax year. For each of the years in subparagraphs (a)(1) through (4), all utility company assets retired after April 1, 2018, and included in assessment as of April 1, 2018, shall not be assessed.
(6) Beginning with the tax year effective April 1, 2024 and every tax year thereafter the locally assessed value shall be the apportioned value determined under subparagraph II(c) effective as of April 1 of the property tax year.
(b) For purposes of subparagraph (a), “final locally assessed value effective April 1, 2018” means the municipality’s value of the utility company’s assets as taken from the department of revenue administration's form MS-1 for 2018.
VII. All determinations or decisions under this section shall be appealable by the electric, gas, or water utility company or the town or city by petition to the board of tax and land appeals under RSA 71-B.
72:8-e Recovery of Taxes by Electric, Gas and Water Utility Companies. For the implementation period of the valuation of utility company assets under RSA 72:8-d, VI and terminating with the property tax year effective April 1, 2024, the public utility commission shall by order establish a rate recovery mechanism for any public utility owning property that meets the definition of utility company assets under RSA 72:8-d, I. Such rate recovery mechanism shall either:
I. Adjust annually to recover all property taxes paid by each such utility on such utility company assets based upon the methodology set forth in of RSA 72:8-d; or
II. Be established in an alternative manner acceptable to both the utility and the public utility commission.
117:3 Appraisal of Property; Exception from Market Value. Amend RSA 75:1 to read as follows:
75:1 How Appraised. The selectmen shall appraise open space land pursuant to RSA 79-A:5, open space land with conservation restrictions pursuant to RSA 79-B:3, land with discretionary easements pursuant to RSA 79-C:7, residences on commercial or industrial zoned land pursuant to RSA 75:11, earth and excavations pursuant to RSA 72-B, land classified as land under qualifying farm structures pursuant to RSA 79-F, buildings and land appraised under RSA 79-G as qualifying historic buildings, qualifying chartered public school property appraised under RSA 79-H, residential rental property subject to a housing covenant under the low-income housing tax credit program pursuant to RSA 75:1-a, renewable generation facility property subject to a voluntary payment in lieu of taxes agreement under RSA 72:74 as determined under said agreement, telecommunications poles and conduits pursuant to RSA 72:8-c, electric, gas, and water utility company distribution assets pursuant to RSA 72:8-d, and all other taxable property at its market value. Market value means the property's full and true value as the same would be appraised in payment of a just debt due from a solvent debtor. The selectmen shall receive and consider all evidence that may be submitted to them relative to the value of property, the value of which cannot be determined by personal examination.
117:4 New Subparagraph; Discretionary Easements; Qualifying Land; Public Benefit. Amend RSA 79-C:3, II by inserting after subparagraph (f) the following new subparagraph:
(g) The preservation of potable water where:
(1) The land is owned in fee by a water utility company; and
(2) The land is used for sanitary radii, retention dam sites and/or watershed protection purposes which is subject to regulation by the department of environmental services to protect water quality, which land may have a well, booster station/pump house, or retention dam structure and/or related piping.
117:5 No Application to Pending Litigation. The methodology for the evaluation of electric, gas, and water company distribution assets established in RSA 72:8-d as inserted by section 2 of this act shall not be construed by any court or the board of tax and land appeals as applicable to the resolution of any pending litigation on the effective date of this act.
117:6 Effective Date. This act shall take effect 60 days after its passage.
Approved: June 21, 2019
Effective Date: August 20, 2019
| Date | Body | Type |
|---|---|---|
| Jan. 30, 2019 | House | Hearing |
| Feb. 7, 2019 | House | Hearing |
| March 13, 2019 | House | Exec Session |
| March 13, 2019 | House | Exec Session |
| House | Floor Vote | |
| March 19, 2019 | House | Floor Vote |
| April 17, 2019 | Senate | Hearing |
| April 25, 2019 | Senate | Floor Vote |
June 21, 2019: Signed by Governor Sununu 06/21/2019; Chapter 117; Eff: 08/20/2019
May 23, 2019: Enrolled 05/23/2019 HJ 16 P. 51
May 30, 2019: Enrolled (In recess 05/30/2019); SJ 19
May 2, 2019: Enrolled Bill Amendment # 2019-1779e: AA VV 05/02/2019 HJ 14 P. 42
May 2, 2019: Enrolled Bill Amendment # 2019-1779e Adopted, VV, (In recess of 05/02/2019); SJ 16
April 25, 2019: Ought to Pass: MA, VV; OT3rdg; 04/25/2019; SJ 14
April 25, 2019: Committee Report: Ought to Pass, 04/25/2019; SC 19
April 17, 2019: Hearing: 04/17/2019, Room 100, SH, 10:10 am; SC 17
March 28, 2019: Introduced 03/28/2019 and Referred to Ways and Means; SJ 12
March 19, 2019: Ought to Pass with Amendment 2019-0960h: MA VV 03/19/2019 HJ 10 P. 49
March 19, 2019: Amendment # 2019-0960h: AA VV 03/19/2019 HJ 10 P. 49
: Committee Report: Ought to Pass with Amendment # 2019-0960h (Vote 19-0; RC)
March 19, 2019: Committee Report: Ought to Pass with Amendment # 2019-0960h for 03/19/2019 (Vote 19-0; RC) HC 16 P. 17
March 13, 2019: Executive Session: 03/13/2019 10:00 am LOB 202
March 13, 2019: Subcommittee Work Session: 03/13/2019 09:30 am LOB 202
March 6, 2019: Subcommittee Work Session: 03/06/2019 01:05 pm LOB 202
Feb. 22, 2019: Subcommittee Work Session: 02/22/2019 09:00 am LOB 202
Feb. 7, 2019: ==RESCHEDULED== Public Hearing: 02/07/2019 11:00 am LOB 202
Jan. 30, 2019: ==CANCELLED== Public Hearing: 01/30/2019 11:00 am LOB 202
Jan. 3, 2019: Introduced 01/03/2019 and referred to Ways and Means HJ 3 P. 27