PUBLIC HEARING HB 2047

PUBLIC HEARING HB 2511

 

TAPES 53-54, A-B, 55 A

 

HOUSE REVENUE COMMITTEE

FEBRUARY 23, 2005   1:00 PM   STATE CAPITOL BUILDING

 

Members Present:                      Rep. Tom Butler, Chair

                                                Rep. Vicki Berger, Vice-Chair

                                                Rep. Mark Hass, Vice-Chair

                                                Rep. Brian Boquist

                                                Rep. Sal Esquivel                                       

                                                Rep. Larry Galizio

                                                Rep. Betty Komp

                                                Rep. Andy Olson

                                                Rep. Chuck Riley                

 

Witnesses Present:                      Pat Shaw, Gilliam County Assessor

                                                Rob Myers, Gilliam County Court

                                                Kelsey Wilson, Confederated Tribe of Umatilla Indian Reservation

Bruce Zimmerman, Confederated Tribe of Umatilla

Indian Reservation

                                                Les Minthorn, Confederated Tribe of Umatilla Indian Reservation

                                                Shawn Miller, PPM Energy

                                                Norm Ross, Pacific Corp/PPM Energy

                                                Bill Linden, City of Klamath Falls

                                                Gil Riddell, Association of Counties

                                                John Phillips, Dept. of Revenue

                                                Mike Olson, Dept. of Revenue     

                                                Grover Simmons, Oregon State Elks Association

                                               

Staff Present:                          Paul Warner, Legislative Revenue Officer

                                                Mary Ayala, Economist

                                                Kristi Bowman, Committee Assistant                                            

 

TAPE 53, SIDE A

002

Acting Chair Berger

Calls meeting to order at 1:06 p.m.

 

 

 

OPENS PUBLIC HEARING FOR HOUSE BILL 2047

 

 

 

005

Mary Ayala

Gives overview of HB 2047 which exempts qualified government entities from property taxation on any intangible property (Exhibit 1).

 

 

 

044

Ayala

Discusses revenue impact (Exhibit 2).

 

 

 

056

Pat Shaw

Testifies against HB 2047 because the bill would exempt the wind-power energy project from taxation (Exhibit 3). The company will be located on Indian property that is exempt from taxation, causing a negative financial impact in Gilliam County.  

 

 

 

090

Rob Myers

Testifies against HB 2047 because it presents another statutory barrier against using potentially productive ground.

 

 

 

111

Kelsey Wilson

Introduces other speakers from the tribe.

120

Les Minthorn

Testifies in support of HB 2047 because it proposes business development and economic diversity.

 

 

 

133

Rep. Riley

Asks how far the tribe is from the proposed energy project.

 

 

 

135

Minthorn

The property is in the ceded boundary of the reservation; about 45 minutes from the current reservation.

 

 

 

144

Acting Chair Berger

Asks if the power plant has been built.

 

 

 

146

Minthorn

Responds not yet; the permit process has been started.

 

 

 

150

Bruce Zimmerman

Testifies in support of HB 2047 because the bill recognizes Indian tribes as a qualified governmental entity that provides necessary services to the tribe. The bill provides certainty about intangible property (contract and contract rights). If contracts are taxed, there is an additional cost that must be borne by reservation residents. Existing services can be provided with more stable costs. Describes essential services provided to tribal residents.

 

 

 

227

Rep. Riley

Asks Mary Ayala about what intangible property is taxed.

 

 

 

229

Ayala

Responds that it is the value placed on the use of certain property. For example, the piece of paper that a contract is written on is not valuable, but the rights extended in the contract are assigned values that are taxed.

 

 

 

240

Rep. Galizio

Asks Mr. Zimmerman about the costs of doing business and jobs being created that impact county infrastructure.

 

 

 

257

Zimmerman

Responds that this bill only affects tax exemption of contracts and contract rights, e.g., a management contract to administer the project.  Regarding the barrier to entry question, that is an issue facing rural counties statewide. That is why partnerships between government entities and private enterprise are viable options to extend services that are usually only available in urban areas.

 

 

 

296

Rep. Boquist

Asks for an explanation of the partnership proposed in Gilliam County of energy project.

 

 

 

307

Zimmerman

Responds with details of the proposed project and how the energy will be shared.

 

 

 

333

Rep. Riley

Asks Mary Ayala about her opinion of the partnership.

 

 

 

336

Ayala

Responds that her discussions with the tribe indicated that their project would not be finished during this biennium, so it was not a

factor regarding property taxation. She discusses the wind power project as it relates to HB 2047.

 

 

 

350

Zimmerman

Further discussion of the wind farm project and a future energy project that will be on tribal land.

 

 

 

392

Rep. Boquist

Asks about shareholder equity regarding the tribe. Is the tribe going to be a majority stockholder?

 

 

 

431

Minthorn

Responds that the tribe would not be a majority stockholder. PPM Energy hopes to return some of the wind-powered energy back to the reservation for job development and to add infrastructure. The tribe will be an equity investor.

 

 

 

TAPE 54, SIDE A

037

John Phillips

Informational testimony regarding intangible property. Dept. of Revenue believes the whole project is taxable. With centrally assessed property, the entire value of the company is assessed (unitary valuation method). This includes the tangible and intangible property, and the two types of properties are not able to be separated. Discusses amendment proposed (Exhibit 4). States that the bill proposes a separation of a property value that the Dept. of Revenue does not recognize.

 

 

 

104

Rep. Galizio

Asks if Mr. Phillips is aware of other cases like this situation.

 

 

 

112

Phillips

There have been bills introduced in the past addressing this issue and the Dept. has testified with the same information. Discusses a similar case pertaining to a FCC license.

 

 

 

132

Rep. Boquist

Requests clarification of Klamath Falls case regarding intangible property.

 

 

 

145

Phillips

Responds that the Dept. agrees with the court’s decision that the property is taxable.

 

 

 

150

Shawn Miller

Testifies in support of HB 2047 because it resolves the relationship between an energy company and the city of Klamath Falls. PPM Energy initiated the bill during the 2004 interim. Currently PPM Energy is the only taxpayer affected by this legislation, although the future project proposed by the Umatilla tribe and Gilliam County could be potentially affected. Explains specifics of the PPM/Klamath Falls business relationship.

 

 

 

191

Norm Ross

Testifies in support of HB 2047 on behalf of PPM Energy because of the tax exemption of the intangible property. The bill has been purposefully drafted to have a narrow focus on the energy business. Explains the litigation that PPM Energy is currently involved in. States that the tax assessment on intangible property is a poor tax

policy because the value of the assessment is based on energy revenues that are volatile.

 

 

280

Miller

Comments on the wording of the HB 2047-1 amendment and relating clause of the bill.

 

 

 

327

Rep. Boquist

Asks: 1) Does the original bill or the amendment address the tangible/intangible property issue regarding the PPM-Klamath tribe project?  2) Would real property then be exempt?

 

 

 

341

Miller

1) Responds that the language in the amendment must have the word “tangible” in it. States that the amendment is not correct. The one-word change involves the Klamath situation.

 

 

 

356

Ross

2) Responds to the real property question. Discusses the assessments regarding tangible and intangible assets.

 

 

 

385

Rep. Boquist

Discusses the impact of the change of wording that would affect the project proposed in Gilliam County.

 

 

 

409

Ross

Responds that the wording “arising from a contract” precludes real property from being exempt. That addresses the Gilliam County issue.

 

 

 

420

Rep. Galizio

Questions and discussion with witnesses regarding the current litigation involving PPM Energy.

 

 

 

TAPE 53, SIDE B

033

Rep. Esquivel

Asks PPM witnesses who would own the assets of the Umatilla project.

 

 

 

040

Ross

Responds that he believes that the Umatilla tribe will be putting an equity interest into their project, but defers to the tribal representatives for further clarification.

 

 

 

047

Chair Butler

Questions and answers exchanged with PPM Energy witnesses, and with John Phillips and Mike Olson, Dept. of Revenue.

 

 

 

175

Rep. Boquist

Asks Dept. of Revenue who will pay the intangible tax.

 

 

 

177

Mike Olson

Responds that PPM Energy will pay the tax, and the costs most likely will be passed on to the ratepayers.

 

 

 

188

Bill Linden

Testifies in support of HB 2047. Provides background of the city of Klamath Falls relationship with PPM Energy in operating the utility. Supports the bill because it maintains the status quo without violating other tax policies. States the city/PPM Energy relationship has worked very well so far.

 

 

 

248

 

Rep. Butler

Questions and answers exchanged with Mr. Linden and Mr. Miller.

 

284

Rep. Riley

Asks if there is more than one contract for marketing the energy and administering the power generation, and are there other entities receiving energy from PPM?

 

 

 

297

Ross

Responds that there are multiple contracts involved between PPM and Klamath Falls. Discusses the specifics of the contracts.

322

Rep. Komp

Asks who is buying the power.

 

 

 

324

Ross

Responds that there are three other buyers of energy—PPM Energy, and two out-of-state buyers. PPM Energy is a broker for energy sales.

 

 

 

365

Rep. Boquist

Questions and answers exchanged with Mr. Linden and Mr. Miller.

 

 

 

TAPE 54, SIDE B

031

Rep. Esquivel

Expresses concern about the future of other projects potentially affected by this bill.

 

 

 

035

Miller

Responds that the statute concerns the “essentially assessed” which is what the tax court used in its opinion. PPM tried to use narrow language to be specific to its own situation.

 

 

 

065

Gil Riddell

Submits written testimony (Exhibit 5). Testifies against HB 2047 because of the proposed tax exemptions.

 

 

 

129

Rep. Butler

Asks if this had been strictly a city-run energy program with city employees, would there have been new revenue?

 

 

 

140

Riddell

Responds that he does not know; there may be different “footing” if the city was selling energy for a profit. PPM is selling their energy to the grid and PPM is not being taxed.

 

 

 

164

Rep. Butler

Further questions and answers exchanged with Mr. Riddell.

 

CLOSES PUBLIC HEARING FOR HOUSE BILL 2047

 

 

 

OPENS PUBLIC HEARING FOR HOUSE BILL 2511

 

 

 

211

Ayala

Gives overview of HB 2511 (Exhibit 6) which exempts from tax any property owned by a fraternal organization and conforms to federal code. Refers to revenue impact statement (Exhibit 7).

 

 

 

252

Acting Chair Berger

Clarifies intent of previous language from the bill.

 

 

 

255

Ayala

Responds that previous language left in bill may have some revenue impact.

 

 

 

294

Phillips

Provides informational testimony on HB 2511. States that a charitable organization has an exempt status in another part of the tax code. This bill would open up tax-exempt status to organizations that otherwise may not qualify under current law. Discusses the definition of fraternal organization. Dept. of Revenue needs clarification of “service system” language in bill (line 20, page 1).

 

 

 

382

Rep. Riley

General comments about service versus fraternal organizations.

 

 

 

411

Rep. Berger

Polls members about their membership with various service organizations.

 

 

 

TAPE 55, SIDE A

030

Grover Simmons

Testifies against HB 2511 because of the proposed language change pertaining to ritualistic form of work. Discusses the Tax Expenditure Report handout, section 2.077 (Exhibit 8), containing the statute definition pertaining to fraternal organizations and the revenue impact of exempted property tax. Refers to the annual Elks report stating the organization’s contributions (Exhibit 9). Refers to proposed language handout (Exhibit 10).  Asks that the bill go back to the current law and leave the language involving ritualistic form of work.

 

 

 

123

Riddell

Testifies against HB 2511 because of potential unintended consequences of definitions in various sections of the bill.

 

 

 

CLOSES PUBLIC HEARING FOR HOUSE BILL 2511

 

 

 

145

Acting Chair Berger

Adjourns meeting at 3:06 P.M.

 

 

Tape Log Submitted by:

Reviewed by:

 

 

 

Kristi Bowman, Committee Assistant

Kim Taylor James, Committee Coordinator

 

Exhibit Summary:

  1. 1.      HB 2047, Staff Measure Summary, Ayala, 1 pg., 02/22.05
  2. 2.      HB 2047, Revenue Impact Report, Ayala, 1 pg., 02/22/05
  3. 3.      HB 2047, Testimony, Shaw, 1 pg., 02/23/05
  4. 4.      HB 2047, Amendment, Legislative Counsel, 1 pg., 02/22/05
  5. 5.      HB 2047, Testimony, Association of Oregon Counties, Riddell, 2 pp., 02/23/05
  6. 6.      HB 2511, Staff Measure Summary, Ayala, 1 pg., 02/23/05
  7. 7.      HB 2511, Revenue Impact Statement, Ayala, 1 pg., 02/23/05
  8. 8.      HB 2511, Handout: Tax Expenditure Report, Simmons, 3 pp., 02/23/05
  9. 9.      HB 2511, Handout: Elks Annual Statement, Simmons, 1 pg., 02/23/05
  10. 10.  HB 2511, Handout: Suggested Language, Simmons, 1 pg., 02/23/05