OHIO Electric tax is cut from GOP plan

The tax would have affected at least four Mahoning Valley communities.
COLUMBUS -- Municipally owned electric utilities in Ohio have dodged a bullet.
Municipalities from throughout Ohio lobbied state lawmakers and got a provision deleted from a plan passed by the House on Wednesday that would have forced municipal electric companies to forward tax revenue to the state to help close a projected $1.5 billion state budget shortfall.
If the provision would have remained in the House-passed proposal, municipal advocates say, it could have meant rate increases for municipal electric company customers.
"The majority of them would have had to raise their rates," Jolene Thompson, executive director of the Ohio Municipal Electric Association, said of the 81 cities and villages that have municipal electric utilities.
Package deal: As part of a package to close the shortfall in the two-year, $45 billion budget, the House passed and sent to the Senate a proposal to cut state spending by $660 million over the two budget years, use up to $279 million from the state's $1 billion "rainy-day fund," and borrow $240 million from the state's share of the national tobacco settlement.
The House GOP package, which is similar to a plan presented by Gov. Bob Taft, also would close certain business tax loopholes. Included among them was the one related to municipal electric companies.
But early Wednesday, the House Finance and Appropriations Committee deleted the provision before forwarding the bill to the House floor.
"We were pleased that our members' concerns were heard," Thompson said.
Municipally owned electric companies collect the kilowatt hour tax from all of their rate payers.
But unlike investor-owned utilities, municipal electric companies do not send all of the tax revenue to the state. Instead the municipal electric companies keep the tax collected from the residents of their political subdivisions.
Before the provision was deleted from the House GOP plan, municipal electric utilities would have had to send all off their kilowatt tax receipts to the state.
That would have generated $49 million in additional revenues for the state during the two-year budget period that ends in June 2003, House Republican leaders said.
Thompson said municipalities likely would have had to pass on the additional costs to rate payers.
Local implications: Among the cities and villages across Ohio that have municipally owned electric utilities are Columbiana, Hubbard, Newton Falls and Niles. Local entities started collecting the tax in June.
For Newton Falls, the provision would have meant a loss of about $175,000 annually.
Hubbard has billed customers outside city limits $12,765 for this year. City council has chosen not to charge inside-city customers the kilowatt hour tax. If inside-city customers had been billed this year, the city would have billed an additional $105,000.
Lobbying: When municipal electricity advocates first learned of the proposal earlier this week, they began lobbying House members intensely.
"We were able to take that provision out of there," said state Rep. Kerry Metzger, a New Philadelphia Republican who sits on the finance committee.
According to Metzger, the Tuscarawas County city of Dover in his House district would have lost $800,000 a year in revenue to the state if the provision would have remained in the plan.
The Senate is expected to consider the House-passed budget measure before the end of the year.

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