T &E/MFP ITEM 1-2
May 7,2010
Worksession 3
MEMORANDUM
TO:
Transportation, Infrastructure, Energy and Environment!
Management and Fiscal Policy Committee
_
Q'Michael Faden, Senior Legislative Attorney
.
",""Leslie Rubin, Legislative Analyst, Office of Legislative
Oversight.t~
Rate
FROM:
SUBJECT: Worksession 3: Expedited Bill 15-10, Taxation - Fuel-Energy Tax
Resolution to change fuel/energy tax rates
This is the joint Committees' third worksession on Expedited Bill 15-10, Taxation - Fuel-Energy
Tax Rate and the companion Resolution to change fuel/energy tax rates, both sponsored by the Council
President at the request of the County Executive and introduced on March 23,2010.
As most recently revised, the Executive would increase the fuel/energy tax rates by 100% for both
residential and non-residential taxpayers. This proposal is the Executive's second revised rate increase since
the release of his FYII recommended operating budget on March 15.
The Executive's April 22 proposal would implement the rate increase retroactively to May 1, raising
an additional $21 million in FYlO, and would sunset the tax rate increase at the end of FY12. The
Executive's Apri122 budget adjustments memo noted:
Due to the severity and most recent income tax write down, I am recommending a higher increase
in the County's fuel energy tax. This increase, combined with the increases recommended on
March 25 will raise an additional $21.4 million in FYlO and $79.8 million in FYIl. Recognizing
the significant impact that this increase will have on County residents and businesses, I am
recommending that the FYII total increase in the Fuel Energy Tax sunset at the end ofFY12.
The table below summarizes the Executive's three proposals and the projected FYll revenue from
each.
Summary of County Executive's proposed fuel/energy tax increase
($
in millions)
132.2
Non-residential revenue
Source: Department of Finance
$134.7
$50.4
$96.2
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Issues
1) Impact of rate increase on taxpayers. The fuel/energy tax includes two separate rate schedules ­
one for residential rate payers and one for non-residential rate payers. Historically, non-residential tax rates
are 2 2/3 times higher than the rates for residential rate payers, resulting in non-residential consumers paying
73% of all energy tax revenue and residential consumers paying 27%. Business representatives opposed an
increase in the tax rates of the size proposed by the Executive and urged that the tax burden be spread more
evenly between residential and non-residential taxpayers.
At the Committees' request, Finance Department staff developed several scenarios to redistribute the
tax burden between residential and non-residential consumers. One scenario would impose one set of tax
rates for all consumers, equalizing the tax burden for residential and non-residential consumers. At the
Committees' April 29
th
worksession, Committee members did not express support for this proposal because
it would raise the rates paid by residential taxpayers by 268%.
Other options would keep the base energy tax rates the same but revise how the
increased revenue
generated from the proposed rate increases would be allocated between residential and non-residential
customers. Finance staff calculated three ways to reallocate the increased revenue:
»
Collect 40% from non-residential consumers and 60% from residential consumers;
»
Collect 50% from non-residential consumers and 50% from residential consumers;
»
Collect 60% from non-residential consumers and 40% from residential consumers.
At the second Committee worksession, Committee members expressed interest in the second and
third scenarios, but not the first, again because that scenario would raise the rates paid by residential rate
payers by 231 %.
FYll
allocation scenarios. OLO staff used Finance Department data to calculate the data in the
four scenarios on ©28-30 - to illustrate options to allocate the tax burden between residential and non­
residential consumers.
Scenario
I
is the County Executive's current proposal
~
increasing rates 100% for all taxpayers while
maintaining the current distribution of the tax burden (73% from non-residential consumers, 27% from
residential consumers). Scenarios 2-4 show three different ways to collect tax revenue from residential and
non-residential consumers - by reallocating how the increased tax revenue generated from the proposed rate
increases would be allocated between residential and non-residential consumers. Each scenario assumes
that the County would raise the same amount of energy tax revenue in
FYll:
$265 million.
On ©28, the top line in each scenario shows the current distribution between residential and non­
residential consumers of the tax burden for the amount of tax
currently collected
by the County Government.
This amount and allocation is the same in each scenario. The middle line shows a revised allocation of the
tax burden for the
additional tax revenue
that would be collected under the Executive's proposed rate
increases. The bottom line in each exhibit shows the
total
dollar amount .and percent of revenue that each
group of taxpayers would pay under each scenario.
The tables on ©29 compare the current average annual tax bill with the projected annual tax bill
based on each scenario in FY
11,
both for residential and non-residential taxpayers.
The tables at ©30 summarize the projected monthly tax bill for residential and non-residential
consumers, based on different levels of electricity consumption.
2
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2) Master-Metered Residential Buildings.
Currently, master-metered apartment buildings are taxed
at the higher rate charged to non-residential consumers of natural gas and electricity. Council staff sees three
primary options to set rates for master-metered residential apartment buildings, which are summarized
in
the
table below. The table identifies the impact on the
tax
rate (and correspondingly the tax bill) for each option.
Options for master metered apartment buildings
3) Effective date of tax increase.
The Executive originally proposed that the new rates take effect on
July I, which has been customary when the rates are raised during the operating budget process. His April
22 revision proposed accelerating the effective date to May I so that significant revenue would flow to the
County during FYlO.
If
the Council does not act on this Bill or resolution until May 19, as Council
President Floreen has scheduled, the new rates could apply to energy delivered on or after May 1. The
County Attorney concluded that doing so would be legally permissible.
In
a recent letter (see © 17), PEPCO
"objects to the retroactive application of the proposed fueVenergy tax, as
it
is unconstitutional under Article
24 of the Maryland Declaration of Rights, and Article III, §40 of the Maryland Constitution."
"ThlSp~e.k~t·
::.";"..'
.T·">
';'i:l~'i~
_
.'·S;' ...
:?"·,
"';;•..,.,.. . .
FOllricfllt:
.
©1
©5
©6
©7
©8
©13
©17
©20
©2I
©22
©26
©27
I
i
Expedited Bill 15-10
Legislative Request Report
Resolution
Rate Schedule based on County Executive's April 22 proposed rate increase
Fiscal Impact Statement
I
PEPCO testimony
PEPCO Letter re retroactivity issue
: Comparison of energy tax rates among regional jurisdictions
I
Comparative examples of monthly electricity tax among regional jurisdictions
i
Planning Department Summary of Economic Issues
. Demographic Data for County Residents
i
Data on impact of proposed increase
OLO Analysis of 4 scenarios for FYII:
Allocation of revenue between residential and non-residential consumers
©28
©29
©30
i
Average annual tax bill for residential and non-residential consumers
Examples of monthly tax bills based on electricity usage
I
F:\LAW\BILLS\IOI5 Fuel Energy Tax\MFP-T&E-5-7-10.00c
3
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Expedited Bill No.
15-10
Concerning: Taxation - Fuel-Energy
Tax - Rate
Revised: 3-22-10
Draft No. _1_
Introduced:
March 23. 2010
Expires:
September 23. 2011
Enacted: _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective:
_~
_ _ _ _ _ __
Sunset Date: ..............
nJ:<e~--=
_ _ __
No
Ch, _ _
Laws of
Mont. Co. _ _---,...
I
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request ofthe County Executive
AN EXPEDITED ACT
to:
(1)
increase the mtes of the :fuel-energy
tax;
and
(2)
genemlly amend County laws related to the fuel-energy
tax.
By amending
Montgomery County Code
Chapter
52,
Taxation
Section
52-14,
Fuel-energy tax
Boldface
Underlining
[Single
boldface brackets]
Double undedining
[[Double boldface brackets]]
* ..
*
Heading or defined term.
Added to existing law
by
original bill.
Deletedfrom existing law by original bill.
Added by
amendment
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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EXPEDITED BILL
No.
15-10
1
Sec.
1.
Section 52-14 is amended as follows:
52-14. Fuel-energy tax.
2
3
4
(a)
A tax is levied and imposed on every person transmitting, distributing,
manufacturing, producing, or supplying electricity, gas, steam, coal,
fuel oil, or liquefied petroleum gas in the County. Beginning on July
5
6
7
1,.
2010, the tax rates in dollars are:
ill
I
For
fuel-energy
transmitted,
distributed,
manufactured,
8
produced, or supplied for residential and agricultural purposes:
FUEL-ENERGY
Electricity
(rurr
kilowatt
l!U
TAX RATE
$0.0072924198
$0.0628010617
$0.0822605134
$18.6267531744
,
i
j
!
Natural Gas
(rurr
thenn)
I
Steam
(rurr
thenn}
· Coal
(rurr
ton)
I
~
Qil
(rurr
gallon):
$0.0899987212
$0.0933631594
$0.0933631594
$0.0955500442
$0.0974004852
$0.0995873700
$0.0135686262
distributed,
manufactured,
I
INo.~
No.~
No .
.1:
No.~
No.Q
LiQuefied Qetroleum gas
(rurr
Qound}
9
10
ill
For
fuel-energy
transmitted,
Qroduced, or supplied for non-residential purposes:
I
FUEL-ENERGY
•Electricity
(rurr
kilowatt
l!U
i
TAX RATE
$0.0193251926
F:\l.AIN\BILLS\1015 Fuel EnergyTax'S1II1.DOC
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ExPEDITED BILL
No. 15-10
Natural Gas
~
thennl
Steam
~
thenn)
Coa1~ton)
~0.1664230814
I
I
~0.2179903605
$49.3578373320
,
I
I
Fuel oil
~
gallon):
!No·1
! No .
L
i
$0.2384966112
$0.2474123724
$0.2474123724
$0.2532076172
$0.2581112858
$0.2639065305
$0.0359568595
I
,
No.J.
i
NO·1
No .
.2.
·ft
LiQuefied Retroleum gas
~
QQund)
11
12
I
I
The County Council [must] may set the rates for various fonns of fuel
and energy by resolution adopted according to the requirements of
Section 52-17(c). The Council may, from time to time, revise, amend,
increase, or decrease the rates, including establishing different rates
for fuel or energy delivered for different categories of final
consumption, such as residential or agricultural use. The rates must
be based on a weight or other unit of measure regularly used by [such]
persons in the conduct of their business. The rate for each fonn of
fuel or energy should impose an equal or substantially equal
tax
on the
equivalent energy content of each fonn of fuel or energy for a
particular category of use. The tax does not apply to the transmission
or distribution of electricity, gas, steam, coal, fuel oil, or liquefied
petroleum gas in interstate commerce through the County if the tax
would exceed the taxing power of the County under the United States
Constitution. The tax does not apply to fuel or energy converted to
13
14
15
16
17
18
19
20
21
22
23
24
25
F:\lAW\BILLS\1015 Fuel Energy Tax\BiII1.00c
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ExPEDITED BILL No.
15-10
26
another fonn of energy that will be subject to a tax under this Section.
The tax must not be imposed at more than one point in the
transmission, distribution, manufacture, production, or supply system.
The rates of tax apply to the quantities measured at the point of
delivery for ftnal consumption in the County.
27
28
29
30
31
32
33
34
35
*
Sec. 2. Expedited Effective Date.
*
*
The Council declares that this legislation is necessary for the immediate
protection of the public interest. This Act takes effect on the date when it becomes
law.
. 36
37
Approved:
38
39
40
Nancy Floreen, President, County Council
Date
Approved:
41
42
43
Isiah Leggett, County Executive
This is a correct copy ofCouncil action.
Date
44
45
46
47
Linda M. Lauer, Clerk of the Council
Date
F:IlAWlBILLS\1 015
Fuel
Energy Tax\8jg 1.DOC
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LEGISLATIVE REQUEST REPORT
Expedited Bill 15-10
Taxation - Fuel-Energy Tax - Rate
DESCRIPTION:
PROBLEM:
This Bill would increase the rates of the fuel-energy tax.
In order to meet current fiscal challenges facing the County, the County
must increase the amount of revenue available to maintain core
Government programs and services.
To enhance the amount of revenue available to support core government
programs and services.
GOALS AND
OBJECTIVES:
COORDINATION:
Office of Management and Budget; Department of Finance
FISCAL IMPACT:
To be requested.
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCES OF
To be requested.
Subject to the general oversight of the County Executive and the County
Council.
INFORMATION:
Joseph Beach, Director of Management and Budget
Kathleen Boucher, Assistant Chief Administrative Officer
Tax laws apply County-wide.
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
N/A
F;ILAWISILLSIIOI5 Fuel Energy TaxILRR.DOC
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Resolution No.
Introduced:
-:-M:-a-rc-:-h~2~3.-::2:-:::0-:-1
0:::---­
Adopted: _ _ _ _ _ _ _ _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President
SLlBJECT:
Fuel/energy
tax -
rates
Background
1.
Section 52-14 of the County Code levies a tax on persons transmitting, distributing,
manufacturing, producing, or supplying electricity, gas, steam, coal, fuel oil, or liquefied
petroleum gas in the County.
Section 52-14 also provides that the County Council may amend the fuel/energy tax rates
by resolution, after a public hearing advertised as required by Section 52-17. A public
hearing was held on this resolution on (date).
The Council finds that it is fair and equitable to continue different rates for fuels and
energy transmitted, distributed, manufactured, produced, or supplied for residential and
agriCUltural purposes and for non-residential purposes.
Action
2.
3.
The County Council/or Montgomery County, Maryland, approves the/ollowing resolution:
1.
2.
On and after July 1, 2010, the fuel/energy
tax
rates levied under Section 52-14 of the
County Code are as shown on Schedule A, attached to this resolution.
This Resolution supersedes Resolution 16-553.
This is a correct copy
0/
Council action.
Linda M. Lauer, Clerk of the Council
Date
F:ILAW\BILLSII011 Budget Reconciliation And Financing Actl1015 Fuel Energy Tax\FYll Draft Resolution.Doc
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Attachment
Resolution No:
SCHEDULE A (starting May 1,2010)
(a) For fuel-energy transmitted, distributed, manufactured, produced, or supplied for residential
and agricultural purposes:
FUEL-ENERGY
Electricity (per kilowatt
hr)
Natural Gas (per therm)
Steam (per therm)
Coal (per ton)
Fuel oil (per gallon)
No.1
No.2
No.3
No.4
No.5
No.6
Liquefied petroleum gas (per pound)
TAX RATE
$0.0104475928
$0.0899728678
$0.1178517384
$26.6858928000
$0.1289379960
$0.1337581080
$0.1337581080
$0.1368911808
$0.1395422424
$0.1426753152
$0.0194392926
(b) For fue I-energy transmitted, distributed, manufactured, produced, or supplied for
non-residential purposes:
FUEL-ENERGY
iElectricity (per kilowatt
hr)
Natural Gas (per therm)
Steam (per therm)
Coal (per ton)
Fuel oil (per gallon)
No.1
No.2
No.3
No.4
No.5
No.6
Liquefied petroleum gas (per pound)
$0.0276865224
$0.2384284834
$0.3123071068
$70.7132340000
$0.3416856894
$0.3544589862
$0.3544589862
$0.3627616292
$0.3697869424
$0.3780895852
$0.0515141254
\\CCL-FO 1\Data\DEPT\Other_Depts\OLO\Leslie\_Budget\FYll \Fuel-Energy Tax Increase\
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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph F. Beach
Director
MEMORANDUM
April 27, 2010
TO:
ntyCouncil
Joseph F. Beach,
~~
Expedited Bill 15-
t
0, Taxation - Fuel-Energy Tax - Rate
FROM:
SUBJECT:
The
purpose ofthis memorandum is to transmit a fiscal and economic impact statement
to
the Council on the subject legislation.
LEGISLATION SUMMARY
The
original proposed legislation introduced March 23, 20 I 0 would increase fuel-energy
tax rates 39.6% consistent
with
the County Executive's March 15 operating budget recommendation.
Since March 15, the Executive has proposed two modifications to the rate increase, the latest ofwhich
was a
100010
increase in fuel-energy
tax
rates effective May 1, 2010 included in his FY 10 and FY11
operating budget amendments transmitted to the County Council on April
22~
20 I O. The latest proposed
rates are attached to this fiscal impact statement. The Executive recommends that the
t
00% increase in
the
fuel~energy
tax rates sunset at the end ofFY12.
FffiCALANDECONONnC~Y
The original Expedited Bill No. 15-10 increased the fuel-energy tax by 39.6% to raise $50
million more in General Fund revenue tban current rates would generate
in
FYll.
These revenues were
assumed in the Executive's March 15 recommended operating budget. The 100% increase recommended
by the Executive on April 22 will produce $101.3 million (combined over FY 10 and
FYI
1) more than
assumed in the March 15 budget and
is
required to maintain balance in the operating budget and restore
reserves to the policy level of 6% oftotal resources. The increase in fuel-energy tax rates will also have a
fiscal impact on the operating budgets of County funded agencies and departments (see attachment for
detail). The Executive recommended certain budget adjustments to accommodate some ofthese cost
increases.
The energy
tax
is a broad-based
tax
paid by households, businesses, and all levels of
government. Based on current usage patterns the recommended 100% increase
will
result in an increase
of approximately $8.00 per month for the average homeowner and $289 per month for the average
nOD­
residential ratepayer. Since the energy
tax
is
based on consumption, the amount of the
tax
can be reduced
by decreasing energy usage, and a number of existing progrruns provide incentives for consumers to
conserve energy.
Office of the Director
101 Monroe Street, 14th Floor' Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
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Nancy Floreen, President, County Council
Apri127,2010
Page 2
The following contributed to this analysis: Bryan Hunt, Office of Management and Budget,
David Platt, Department of Finance.
JFB:bh
Attachments
c: Kathleen Boucher, Assistant ChiefAdministrative Officer
Dee Gonzalez, Offices ofthe County Executive
David Platt, Department ofFinance
Bryan Hunt, Office of Management and Budget
John Cuff, Office of Management and Budget
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FY08
NON-RESIDENTlAL
FY09
Carbon Taxes
Res. No. 16-553
PetChange
I
FYIO
I
Proposed Rlltes
FYtl
Pet.
Chg.
FYIO-FYll
Proposed Rates
Pet.
Chg.
I
FYIO-FYll
Proposed Rates
Pet.
Chg.
Fuel-Oil
#1
#2&#3
#4
#5
#6
LPGas
$0.1$53116710
$0.1611177210
$0.1648916496
$0,1680849738
$0.1718589024
$0,0245305359
$29.4638475000
$0.1419577758
$0.0125847830
$0.1135373730
$0,1708428447
$0.1772294931
$0.1813808146
$0.1848934712
$0.1890447926
$0,0257570627
535.3566170000
$0.1561535534
$0.0138432612
$0,1l92142417
10,0"A. $0.1708428447
1O.0"A. $0,1772294931
10.0% $0.1813808146
10.0% $0.1848934712
10,0% $0,1890447926
5,0010 $0,0257570627
20,0"10 $353566170000
\0,0% $0,1561535534
IO.OOA. $0.0138432612
5.0% $0.1 192142417
$0.2384966112
10,2474123724
$0.2532076172
$0.2581112858
$0.2639065305
$0,0359568595
$49.3578373320
$0,2179903605
. $0.0193251926
$0.1664230814
Coal
Steam
Electricity
Natural Gas
39,6')1.
$0.27966973671
39.6% $0,29012468020
39.6% $0.29692039350
39.6% $0.30267061235
39.6% $0.30946632549
39,6% $0,04216431164
39.6% $57.87878202900
39.6% $0.25562336692
39.6% $0.02266141858
39,6% $0.19515371366
63,7% $0.34168568940
63,7% $0.35445898620
63.7% $0.36276162920
63.7% $0.36978694240
63.7% $0.37808958520
63.7% $0,05151412540
63.7% $70,71323400000
63,7% $0,31230710680
63.7% $0.02768652240
63.7% $0.23842848340
100,0%
100.0%
100.0%
100,0%
\00.0%
100,00/0
100,0%
100,0%
100.0%
100,0%
RESIDENTIAL
Fuel-Oil
#1
#2&#3
#4
#5
116
LPGas
$0.0586081800
$0.0607991400
$0.0622232640
$0,0634282920
$00648524160
$0.0092568060
$ILI 191220000
$0,0535689720
$0.0047489058
$0.0428442228
$0.0644689980
$00668790540
$0.0684455904
$0,0697711212
$O.Q713376576
$0.0097196463
$13.3429464000
SO.os89258692
$0,0052237964
$0.0449864339
10.0%
10.0%
10.0%
10.0%
10.0%
5,00A.
20,0%
10,0010
10.00/0
5,l}%
$0.0644689980
$0.0668790540
$0.0684455904
$0,0697711212
$0,0713376576
$0.0097196463
1.13429464000
$0.0589258692
$0.0052237964
$0.0449864339
$0,0899987212
$0,0933631594
$0.0955500442
$0.0974004852
$0.0995873700
$0.0135686262
$18.6267531744
$0.0822605134
$0,0072924198
$0.0628010617
39.6% $0.10553574973
39.6% $0.10948101140
39.6% $0.11204543148
39.6% $0.11421532540
39,6% $0.11677974549
39,6% $0.01591106099
39,6% $21.84240325680
39.6% $0.09646164788
39.6% $0,00855135471
39.6% $0.07364279229
63,7% $0.12893799600
63.7% $0.13375810800
63.7% $0.13689118080
63.7% $0,13954224240
63,7% $0.14267531520
63,7% $0.01943929260
63,7% $26,68589280000
63,7% $0.11785173840
63,7% $0.01044759280
63,7% $0.08997286780
100.0%
100.0%
100,0%
100,0010
100.0010
100.0%
100,0%
100,0%
100.0%
100.00/.
Coal
Steam
Bleclricity
Na1ura1 Gas
(i)
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.
.,
-~.~.,
Impact of Proposed Increase to Energy Tax .
Average Impact to Residential and Non-Residential Taxpayers
Based on latest figures available for energy consumption (2009 Energy Tax data), housing units (2008 Census Bureau
data) and business establishments (2007 Census Bureau data)
Residential
Units
Consumed
12,808
624
Current
Tax
$66.91
$28.08
$94.9~
,
.,."
Units
Fuel Type
kWh
ElectricitY
Heating Fuel
Therm
Total
Monthly Change
Tax Rate
0.005224
0.044986
Proposed 100% Increase
For Each
Total
Difference
1% Increase
$133.81
$66.91
$0.67,
$28.08
$0.28
$56.16
$189.97
$94.99
$0.95
.$ .
..L'."
8
Non-Residential
Examnles of Proarams Funded with EneravT
--­
....
-- -----
Units
Fuel Type
Consumed
Units
Tax Rate
Electricity
kWh
204,614
0.013843
Heating Fuel
Therm
5,325
0.119214
Total
Monthly Change
Some Examples
Current
. Tax
$2,832.53
$634.86
$3,467.39
Proposed 100% Increase
For Each
Total
Difference
1% Increase
$5,665.06
$2,832.53
$28.33
$1,269.72
$634.86
$6.35
$6,934.78
$3,467.39
$34.67
.$
289
-
3,000 sq.
ft.,
4-bedroom, 3.5 bath house (DEP employee)
Council Office Building (142,480 sq.
ft.)
~~t
County Government Center (13,700
s~in
Current
Tax
. $89.68
$47.075.00
$3,537.86
Proposed 100% Increase
For Each
Total
Difference
1% Increase
$179.35
$89.68
$0.90
i;;··.<$7Al!
$47,075.00
$94,150.00
$470.75
3iY$3-,S22':92
$3,537.86
$7,075.72
$35.38
('iri;:$294;821
\b~C:~h~e
@
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" Impact of Proposed Increase to Energy Tax
Impact to County Government and County Agencies
Based on
FY09
energy consumption for the
County
Government and
FY08
energy consumption for County agencies.
Current·
Tax
County Government
Montgomery County Public Schools
Washington Suburban Sanitary Commission
MalYland-National Capital Park & Plannina Commission ,
Montaomarv Collaoe
Total
Cost Estimate
of Proposed
Mar
15
CE Ree
Ratdn~
MCG (Tax
+
Non Tax)
MCPS
WSSC
MNCPPC
MC
Total
Proposed
100%
Increase
Total
Difference
$2691671
$3706816
$3009002
$259967
$567488
$10234944
$5383341
$7413632
$6018004
$519935
$1134975
$20,469887
$2,691671
$3706816
$3009002
~259
967
$567488'
$10234 944
All Agencies
FY11
~
Am§cgmenl
FY10
~
996,030
0
0
96,200
21Q.Q.QQ
1,302,230
2,691,670
3,706,820
3,009,000
259,970
567.490
10,234,950
1,695,640
3,706,820
3,009,000
163,770
357490
8,932,720
691,710
0
0
163,770
357.490
1,212,970
448,610
617,800
501,500
43,330
94,580
1,705,820
MCG Allocation
UtilitiesNDA
Transit Services
Recreation
Tax Supported
Fleet Mgmt SVC5
PLD - Bethesda
PLD - Silver Spring
PLD-MH
PLD - Wheaton
LIquor Control
SWS Disposal
Non Tax Supported
Total MCG
FY09
8~!.Ii1
!;m,
23,605,663
82,350
M50,374
26,738,387
1,011,100
1,167,144
1,734,446
1,924
97,134
889,147
130.616
5,031,511
31,769,898
%
ofTota!
Mar
15
CE Ree
74.30%
996,030
0.26%
a
,9.60%
.Q
84.16%
996,030
3.18%
3.67%
5.46%
0.01%
0.31%
2.80%
0.41%
15.84%
0
0
0
0
0
0
Allocation of
Increase
FY11
&:!!endment
FY10
~
1,999,960
6,980
258,440
2,265,380
85,660
98,890
146,950
160
8,230
75,330
11,070
426,290
2,691,670
0
6,980
258,440
265,420
85,660
98,890
146,950
160
8,230
75,330
11,070
426,290
691,710
333,330
1.160
43,070
377,560
14,280
16,480
. 24,490
30
1,370
12,560
1,850
71,060
448,620
.Q
0
996,030
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7
~pepco
A PHI Company
Charles
L.
Washington, Jr.
Manager
Government Affairs
701 Ninth Street,
mil
Washington, DC 20068
202 872-2132 Phone
202 872-2032 Fax
April 20, 2010
The Honorable Nancy Floreen
President, Montgomery County Council
100 Maryland Avenue
Rockville, MD 20850
Re: Expedited Bill1S-17 - Taxation - FuelJEnergy
Dear Council President Floreen,
Good evening. My name is Charles Washington and I am the Public Affairs Manager for
Pepco. Pepco appreciates the opportunity to comment on the proposed FuellEnergy tax
currently before you. Pepco, a subsidiary of Pep co Holdings, Inc., provides safe and reliable
electric service to 767,000 residential and commercial customers in Washington, D.C., and its
Maryland suburbs, including Montgomery County.
As the electric distributor for the maj ority of Montgomery County, Pepco is concerned about
the proposed increase in the county's Fuel/Energy tax. In 2003, this tax on electricity, natural
gas, oil, coal and other fuels raised $26 million. In 2011, the county's annual FuellEnergy tax
revenues would increase to nearly $217 million if this proposal is approved. That is a
731
%
increase in only 8 years.
Montgomery County Energy Tax (2003-2009)
.S
><
!IS
I--
III
~.~~
'·"-1"-.. - --
... -.. - - - - -.... .- - - -- .-
--
..
..- . -- . --
....
..
.. . .
-.
e'l.Q
150 ..
>.c
-
Li:
W
W2
~=
c .-
100.
~I_~_-_n_
2003
2004
2005
2006
2007
i ___
Pepco Fuel Energy
..
~
_.-.-._
.....
_
--<_
..
--=--.-.-..----------.----.-. -.-.-..
-.--~
.. .
. . --. -.-.
·------··l
.
.-.... -... ..::: -...
;t- _ _
.--4_.:'~,
- ........ __ -... - .
-+-:.-._._-... .... _ ,
...-.-.
~-
. -
-''''1
- -_.mum
2009
I
2008
2010*
2011#
-+-
Montgomery County Total'
Fuel Energy Tax Receipts •
..
Tax Payments
'2010 Iotas projected v.ilh current rates. #2011
tdais
erqected witl Executive's propos
ed
increases.
@
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The County's FuellEnergy increases since 2003 have always disproportionally impacted
commercial customers. However, this proposed increase crosses a notable threshold. Pepco, a
distribution company, collects approximately $88.6 million in distribution revenues from
commercial customers in Montgomery County. As illustrated below, if the County
Executive's proposal is approved, the County would collect over $130 million from those
same customers. In essence, the County will be collecting more from the energy tax than
Pepco collects as a power delivery company to maintain and operate our electric system.
Pepco Distribution Revenues vs. Projected Fuel
Energy
Tax
Revenues from MoCo Commercial Customers
• Projected Fuel Energy Tax
Revenues from MaCo
Commercial Customers
• Pepco Distribution Revenues
worn
MaCo Commercial
Customers
As demonstrated below using actual randomly selected commercial accounts, this increase
will have a real impact on County businesses. One restaurant in Silver Spring will see an
increase of over $3,000 a year. A hotel in Bethesda will see a tax increase of approximately
$41,000 a year. The County's successful Biotech companies will see increases of hundreds of
thousands of dollars of year, with at least one projected to see an increase of over h3;lf a
million dollars.
Business
Apartment Building in
Bethesda
Coffee in Rockville
Restaurant Silver Spring
Ice cream parlor in
Germantown
Hotel in Bethesda
• Grocery Store in Silver Spring
I
Florist in Takoma Park
KWH
194347
Old Tax
New Tax
I
Difference
8118
28640
9960
392488
232721
1584
129920
365876
5112805
I
$32,284.76
$1,348.56
$4,757.65
$1,654.55
$65,199.77
$38,659.41
$263.13
$21,582.20
$60,779.00
$849,334.74 •
$52,850.14 •
$2,207,58
$7,788.28
$2,708.49
$106,732.02
$63,285.46
$430.75 •
$35,330.06
$99,495,23
$1,390,360,97
$20,565.39
$859.03
$3,030.62
$1,053.95
$41,532.25 •
$24,626.04
$167,62
$13,747.86
$38,716.23
$541,026.23
~ing
children
....
in Rockville
any
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It
is important to note that the proposed increase on commercial customers will almost
certainly have an impact on County residents as well.
In
compliance with the applicable laws
and regulations, Pepco charges apartment buildings and condominiums that are master­
metered the non-residential FuellEnergy tax rate. Upon the expiration of their leases, property
management companies will pass the FuellEnergy tax increase through to renters. Renters in
these master-metered facilities will be harder hit than other County residents. As indicated
below using randomly selected actual Pepco accounts, where a typical, individually metered
residential customer who uses 1000 KWH a month would see a tax increase of $40 a year; a
similar resident in a master-metered building would be responsible for $106 a year.
• Typical Homes
I
KWH
1868
3370
258
Old Tax
$117.10
$211.25
$16.17
New Tax
$191.69
$345.82
$26.47
Difference
$74.59
$134.57
$10.30
7,150 SQF Home
in Potomac, M D
. 1,428 SQF Town Home
i
in Silver Spring
789 SQF Apartment
in Bethesda
6 bedroom, 5 bath
Home in Germantown,
MD
i
4 bedroom, 3.5 bath
• Home in Rockville, MD
3,600 SQF Home
in Gaithersburg, MD
5420
1180
I
$339.76
$73.97
$40.75
$556.18
$121.09
$66.70
$216.42
$47.12
$25.95
I
650
I
Pepco and its customers would be responsible for approximately 74% of the revenues from
this tax, or $160.4 million. This comes at a time when Pepco's customers are experiencing
unprecedented financial difficulties. More than 48,600 Pepco customers are currently in
arrears for over $19 million. Many disconnected accounts are never settled and must be
written-off. In the first quarter of 20
I
0, Pepco wrote-off over 2,700 Montgomery County
accounts, valued at $1.6 million. This bad debt must then be added to Pepco's Maryland rate
base resulting in higher rates for all Maryland customers, including those in Montgomery
County.
This tax also puts Pepco's Maryland customers at risk because the company pays the tax on
quarterly usage, even ifit cannot collect the tax along with other portions of the bilL The risk
to customers would be somewhat mitigated if Pepco remits the tax to the County as a pure
pass-through, paying only what we actually collect.
Pepco recognizes that, if approved, our customers will be hit hard by the proposed tax
increase. We are working with our customers to mitigate the challenges of the tough
economic times by offering budget billing plans that allow customers to manage their energy
costs.
In
recent weeks, Pepco announced additional programs to encourage its Maryland
customers to conserve by providing energy saving opportunities in the home and installing
energy efficient products which in turn save money.
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Earlier this year, Pepco also announced that beginning June 1,2010 the cost for Standard
Offer Service (SOS) electricity will decrease by 2.2 percent for residential Maryland
customers. The reduction in the cost of electricity translates into a savings of$3.37 on the
average monthly bill. This decrease in the cost of electricity is the result of competitive bids to
supply electricity.
Despite our efforts on this front, we know many of our customers remain concerned about
their energy bills. In consideration of these customers, Pepco urges the County to avoid
raising additional revenues through energy bills and to seek alternative funding solutions
wherever possible.
Pepco recognizes this is a very challenging economic time for Montgomery County and tough
decisions must be made in order to balance the budget. However, we felt that it was critical to
communicate in real tenus the direct and indirect impact ofthis proposed energy tax to our
common constituency.
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Ipepco
A PHI Company
Kim
M.WmQn
Vice I'resideht -Maryland Affairs
701 Ninth Street. NW
SUIte
92t:r.
Washington. DOtoOSS,·
(402) 872·2524
ktnwatsonl@P6PCQ;corn.
Apr" 28, 2010
The Honorabie Nancy Floreen .
President, Montgomery County Council
100
Maryland Avenue
Rockville, MD 20850
Dear Council President Ftoreen:
I write toda.y to
furth~r
addre$Pepco'.s posifion on E.xpedited CoUhcilSiU
1$'-10,
Taxatiot'l-Fuel-EnergyTax -Rate,and the alternative resolution
tosignific~mtly
Increase
the fuel/energy tax rate$.PreviQusly, Charles Washington, Manager, Government
Affairs, testified on behalf of Pepco thatthe proposed increase would negatively impact
the
306,000
commercial and
resid~ntia'
customers
We
serve in Montgomery CountY ..
[n
addition to our concern about the. negativeciirect and indirect impact
of
this proposed .
energy taxon our customers, Pepco strongly obje.cts to
thista~being
implemented
retroactively.
The most Jecent County Executive proposal requests that the new cate!;lta.ke.e,ffecton
May 1,.2010. However, the County Counciltras announced thaUt does not plan to take
action on the Executive's proposal before May 19. This plan poses. serious legal issues
as well as operational and customer service chaliengesfor PepCO.
Pepco objects to the retroactive appfication of the proposeqfuellenergytax, as
it
is
unconstitutional under Article' 24 of the Maryland Declaration of Rights, and Article HI,
§40 of the Maryland Constitution. In determining whether or not a retroactive civil tax Is
unconstitutional under these provisions of the Maryland Constitutipn, the MaryJang
courts analyze the legislature's intent and whetherthe retroactive legislation impairs a
vestedrighL Pepco's position is thaHhe proposed retroactive tax likely impairs a
vest~d
right and istherefore
uncons~itutionaL
The Court ofAppeafs of Marylang·has broadly defined "vested
righfs~"
When
deterrpihlng, whether vested. rights have been impaired, the Maryland.courts consider
.
whether the retroactive tax isa change in legislative poficy. Pepco submits that
th~
retroactive. tax is tantamount to a change In legislative policy, and thus, unconstitutionaf,.
ihsofaras the fueUenergy tax is intended to be fully recoverable from customers. County.
@
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The Honorable Nancy Floreen
April 28, 2010
Page 2
Executive Leggett's March 18,2010 letter to you explicitly acknowledged this policy by
stating, "[a]s the Council knows, the County's energy tax is actually a tax on fuel oil,
natural gas, and electric utility providers which is passed on to aU utility customers."
However, the proposed retroactive application of the fuel/energy tax would likely prevent
full recovery of this tax from Pepco's customers. Our intention, both in Mr. Washington's
testimony and in this letter, has been to illustrate the difficulties, and likely near
impossibility, of full recovery of the retroactive portion of the proposed fuel/energy tax.
Thus, approval of the proposed retroactive tax would indicate a change in legislative
policy from complete recovery of the tax from customers to only partial recovery by
utilities, at best.
Additionally, the sheer magnitude of the proposed Increase is sufficient to indicate a
change in legislative policy, which would be unconstitutional if applied retroactively. If
adopted, the proposed amendment will retroactively raise the fuel/energy tax a
staggering 100%. The Court of Appeals of Maryland has previously considered the
retroactive approval of a much lower percentage tax increase to be a change in
legislative policy.
In addition to the fact that the proposed retroactive fuel/energy tax represents a clear
departure from existing legislative policy, the courts may consider several additional
factors in determining whether a vested right is impaired by a retroactive civil statute.
One such factor is whether the statute works substantial injustice. Pepco submits that
the negative effects of trying to recover the proposed retroactive portion of the
fuel/energy tax increase (i.e., approximately $4.5 million) works a substantial injustice
against the company. When combined with the customer/constituent dissatisfaction,
community
ill
will,
and increased operational demands; the potential financial exposure
Pepco faces for the portion of the retroactive increase that it is unable to collect from
customers is all the more burdensome.
In addition to the unconstitutionality of the retroactive tax increase, Pepco faces serious,
financial, operational, and customer care concerns. If the fuel/energy tax is implemented
retroactively, under our current tariff, Pepco would under-collect the revenue required to
compensate the Company for the fuel energy tax by approximately $4.5 million. Our
billing system must be programmed in advance of any tax increases and is unable to
"back-bill" customers for a retroactive tax increase. If the Council approves a retroactive
tax increase, it
will
be nearly impossible for the Company to accurately collect the
.
difference in the tax increase from customers, based on their usage.
Instead, Pepco would either attempt to manually calculate the adjustment to all
Montgomery County customers on our system or cancel and "rebill" all statements
issued before May 20. Either of these options would be costly and labor intensive,
requiring either weeks of programming or many man-hours of account work in addition to
costs for postage and printing new statements. Undoubtedly, Pepco would still be unable
to fully realize the required revenue because we would be unable to collect from
customers who are no longer associated with the premises or have been final billed.
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The Honorable Nancy Floreen
April28,2010
Page 3
The customer impact of this retroactive tax would prove challenging to the company as
well. If the County Executive's proposal were approved, Pepco would implement a
proactive communications plan to explain to customers why they may now have a
balance for a monthly charge that they had previously paid in full. Still, we would expect
a flood of confused and angry customers to contact our call centers. Large businesses,
in particular, stand to see significant increases and many of these businesses will
express their serious concerns about such large increases to Pepco's customer service
representatives. It is also highly likely that these customers, your constituents, will
contact the Council and the Maryland Public Service Commission.
In aggregate, the challenges of this retroactive tax will be a costly burden for Pepco and
its residential and business customers. Pepco strongly objects to the proposed
retroactive application of the tax. If the County Council chooses to raise the fuel energy
tax to address the current budget challenges, the company requests that the Council
collect the desired revenue through a constitutionally-permissible implementation of the
fuel energy tax that is not retroactive and that provides ample notice of these significant
bill increases to Pepco and its customers.
,
,I')
.
~~;M ~~/~V'--'
V/
,KiJ Jvatson
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Comparison of Fuel/Energy Tax Rates, Current and FYll Proposed
*
The
tax
rates in Prince George's County's proposed FY11 operating budget do not distinguish between residential and non-residential rates.
**
Montgomery County Executive's April22
nd
proposed tax increase.
***
Comparison of both Montgomery County residential and non-residential rates with Prince George's County's single rate.
Sources: Montgomery County Executive's Proposed FYII Operating Budget and April 22, 2010 FYlO and FY11 Budget Adjustments; Baltimore
City Fiscal
2011
Preliminary Budget Plan; Prince George's County Proposed Operating Budget Fiscal Year
2011;
Fairfax County Code; Fairfax
County Website; Fairfax County FY20
11
Advertised Budget Plan; District of Columbia Code; District of Columbia Website; District of Columbia FY
2011
Proposed Budget and Financial Plan; Maryland Association of Counties (MACO) FY 2010 Budget and Tax Rates Survey
®
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Calculation of Monthly Fuel/Energy Tax for Electricity Usage by Actual Montgomery County Businesses and Homes
Business and home examples provided by Charles Washington, PEPCO's Manager of Government Affairs. Tax calculations based on the Montgomery
County Executive's proposed fuel/energy tax rate on April 22, 2010 and on the proposed FY11 rates in other jurisdictions.
Examples of Monthly Electricity Tax - Non-Residential
$65,766
$5,049
Office Building
Grocery Store
Apartment Building
-~~~~
Rockville
Silver Spring
Bethesda
--­
365,876
232,721
194,347
129,920
28,640
....
$10,130
$6,443
$5,381
$3,597
$793
$276
$225
$44
----------­
$4,706
r--...
.....
$2,533
----------­
$2,389
$1,519
$1,269
$848
$187
$65
$53
$10
$2,173
$1,382
$1,154
$772
$170
$59
$48
----------­
$2,993
$2,500
$1,671
$368
-------­
$1,611
$1,345
$899
$198
$67
-------­
------­
Non-profit - Serving Children
Restaurant
Ice Cream Parlor
Coffee Shop
Florist
not identified
Silver Spring
Germantown
-------­
~------
9,960
8,118
1,584
Rockville
Takoma Park
$128
...
f----­
$104
$20
$56
$11
$9
Examples of Monthly Electricity Tax - Residential
-
3370
1868
1180
650
258
$35
$20
$12
$7
$3
$24
-------­
$23
$13
$8
$4
$2
$20
$11
$7
$4
$2
$7
$4
----­
House
House
House
----­
Potomac
Rockville
Gaithersburg
Bethesda
7,150 square feet
4 BR, 3.5 BA
3,600 square feet
789 sQuare feet
$13
$8
$5
$2
$2
$1
$1
Apartment
Sources for both tables: Businesses and electricity usage taken from April 20, 2010 written testimony from Charles Washington, PEPCO Manager of Government Affairs;
Montgomery County Executive's Proposed FYll Operating Budget and April 22, 2010 FYlO and FYII Budget Adjustments; Baltimore City Fiscal 2011 Preliminary
Budget Plan; Prince George's County Proposed Operating Budget Fiscal Year 2011; Fairfax County Code; Fairfax County Website; Fairfax County FY20 11 Advertised
Budget Plan; District of Columbia Code; District of Columbia Website; District of Columbia FY 2011 Proposed Budget and Financial Plan; OLO analysis
@
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April 27, 2010
MEMORANDUM
TO:
The Honorable Nancy Floreen, Chair
Transportation, Infrastructure, Energy & Environment (T&E)
Montgomery County Council
The Honorable Duchy Trachtenberg, Chair
Management and Fiscal Policy (MFP)
Montgomery County Council
FROM:
SUBJECT:
Jacob Sesker, Planner Coordinator (301-650-5619)
Summary of Economic Issues-Fuel/Energy Tax
The proposed budget includes additional revenues of approximately $100 million attributable to
an increase in the Fuel/Energy Tax. As a matter of perspective, that $100 million gap is
equivalent to more than 8% of the total countywide real property tax revenues. That gap will be
closed by increasing taxes or decreasing spending! or some combination of the two; however,
actual increases in property tax are unlikely. To the extent that the gap is partially closed by tax
increases, those increases will be in the form of increases to excise taxes
2 •
The Executive has now proposed an increase of 100% in the Fuel/Energy tax rates, which
follows the earlier proposals to increase the rates by 39.6% and then 63.7%. For each ofthe three
successive proposals, the Executive has proposed increasing the rates by the same percentage for
all fuel types and for all end users.
The following represents a brief outline of the economic issues raised by this proposed tax
increase. In brief, those issues are uniformity/equity, and timing (onset and sunset). Further
discussion, and possibly analysis, is almost certain to occur over the next two weeks. Answering
these questions will likely require further coordination between the County Executive, Council
staff, and the Planning Department.
I
An
issue not addressed in this memo is the economic impact of reductions in government services, some of which
do negatively impact businesses and the overall business climate in a jurisdiction.
taxes are taxes on the exercise of a privilege (e.g. distribution of energy, consumption of alcohol, etc.). In
contrast
to
property taxes, there is no Maryland requirement that excise taxes be uniform (Le. that commercial and
residential rates be the same). In addition, there are no Charter limitations on increases in excise taxes. Excise taxes,
like all taxes, are primarily tools for raising revenue. Excise taxes may often be perceived as a way to influence
behavior as well-for that reason many excise taxes are referred to as "sin taxes."
2
Excise
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Uniformity
a. Commercial versus residential
The question raised by many members of the business community in compelling written
testimony submitted at the April 21
st
public hearing was whether the increase in the Fuel/Energy
Tax unfairly burdens the business community. If the County leans more heavily on the
FuellEnergy Tax to raise revenues, the portion of tax revenues (all sources, i.e. property, income,
development impact, and other excise taxes) generated by commercial uses will increase. A
question for further analysis is whether that increase will be exacerbating an existing inequality
between commercial and residential, or narrowing an existing gap.
In this case, the current FuellEnergy Tax rates for commercial users are 2.65 times higher than
the rates charged for energy distributed to residential users
3 •
Because the Executive has proposed
equal rate increases for residential and commercial, that relationship would remain the same if
the proposal were adopted.
Alternative distributions of the increase could fall anywhere within a range. The examples below
are intended to illustrate alternative distributions of the burden where the total amount of revenue
raised by the tax remains constant:
E
xecu
t"
t
s
P
roposa
I
lve
FYII
Consumers
Residential
Commercial
Total-All Uses
367,000
37,977
FY 11 Average
Tax Paid
$198.93
$5,236.56
FY 11 Projected
Revenue
$73,005,747
$198,868,900
$271,874,646
%
Rate Increase
100%
100%
Example
1:
Maintain
FY10
Commercial Rate
FYll
Consumers
Residential
Commercial
Total-All Uses
367,000
37,977
FY 11 Average
Tax Paid
$469.86
$2,618.28
FY 11 Proj ected
Revenue
$172,440,197
$99,434,450
$271,874,646
%
Rate Increase
372%
0%
Example 2: Maintain
FY 10
Residential Rate
FYII
Consumers
Residential
Commercial
Total-All Uses
367,000
37,977
FY 11 Average
Tax Paid
$99.46
$6,197.74
FY 11 Projected
Revenue
$36,502,873
$235,371,773
$271,874,646
%
Rate Increase
0%
137%
For comparison, in Fairfax County the rate charged to commercial users is 1.25 times higher than the rate
charged to residential users.
3
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Example 3: Achieve 50/50 Split Overall
I
FYIl
Consumers
Residential
Commercial
Total-All Uses
367,000
37,977
FY 11 Average
Tax Paid
$370.40
$3,579.46
FY 11 Projected
Revenue
$135,937,323
$135,937,323
$271,874,646
% Rate Increase
272%
37%
.pl
1
E
xample 4 S lit E xecu
ti
ve
'
s
P
ropose
dI
ncrease 50/50
FYII
Consumers
Residential
Commercial
Total-All Uses
367,000
37,977
FY 11 Average
Tax Paid
$288.41
$4,371.81
FY 11 Projected
Revenue
$105,846,106
$166,028,540
$271,874,646
% Rate Increase
190%
67%
.
.
b. Multi-family versus single-family residential
A potential question for further consideration is whether an amended Fuel/Energy Tax should
mandate that energy distributors treat multi-family residential dwellings as residential dwellings
for purposes of charging the Fuel/Energy Tax.
PEPca charges commercial rates to "master metered" multi-family dwellings (condos and
apartments). In essence this means that some residents of multi-family structures are paying a
Fuel/Energy Tax rate that is 2.65 times higher than nearby residents of single-family structures.
Residents of multi-family dwelling units have lower incomes than residents of single-family
dwelling units, and therefore have less disposable income with which to absorb a tax increase.
Timing
Two possible issue for additional discussion are:
(1)
whether to introduce this increase gradually,
and (2) the timing and wording of a sunset provision.
The Executive has proposed that the increase be effective on May 1,2010, and that the entire
proposed increase sunset at the end ofFY12 (Le. the increase would be effective for 26 months).
Excise taxes are first and foremost tools for raising revenue. The revenue is needed now, and as
such the Executive has proposed that the rate change be effective immediately.
Sudden increases in regulatory costs (e.g. taxes) often result in one party bearing the entire
unforeseen burden. That burden might fall entirely on the landowner or entirely on the tenant,
but in either case the parties might have allocated costs and risks differently in negotiating the
lease if the possibility of a significant increase in a specific cost had been apparent at the time of
the lease negotiation. While the economy can adjust to these changes over time, adjustments in
the short-term are difficult.
Sunset provisions may provide clarity for parties who are negotiating long-term leases in FYll
and FY12 regarding their costs/risks in the short-term and in the long-term. Clarity and a
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commitment to sunset certainly would aid in the negotiation oflong-tenn leases that are to occur
during the next two fiscal years.
An additional issue discussed in testimony was concern that consumption would change and that
therefore revenues are not likely to meet projections. While revenues often exceed or fall short
ofprojections, energy consumption is relatively inelastic and is unlikely to change significantly
during the next 26 months as a result of this tax increase.
cc:
Steve Farber
Leslie Rubin
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Demographic Data for Montgomery County Residents
2008 Census Update Survey
Homeowner (all)
Homeowner with Mortgage or Loan
Renter
$2,253
$2,472
$1,990
0.9%
2.4%
5.8%
8.0%
15.4%
26.4%
17.1%
$1,685
$1,746
$1,535
1.3%
3.4%
12.7%
15.8%
24.7%
28.1%
8.3%
$1,417
$1,536
$1,179
5.4%
10.9%
23.5%
22.1%
$1,586
$2,033
$1,419
6.7%
6.9%
15.1%
20.1%
20.6%
16.9%
8.1%
$2,005
$2,188
$1,327
2.6%
4.9%
11.8%
13.7%
19.2%
22.5%
11.5%
.lOt)7 Household
Income
Distribution
% Under $15,000
% $15,000 to $29,999
% $30,000 to $49,999
% $50,000 to $69,999
% $70,000 to $99,999
% $100,000 to 149,999
% $150,000 to 199,999
% $200,000+
%
Homeowners
16.8%
22.2%
29.4%
18.4%
19.3%
% Renters
26.9%
28.7%
34.9%
35.7%
34.1%
Source: 2008 Census Update Survey; Research
&
Technology Center, Montgomery County Planning Dept., M-NCPPC
8/09
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FuellEnergy Tax Data Tables
April 29, 2010
Annual Tax Revenue, FY03-FYll
($
in millions)
..,....,.--.-,--,...,....,...,....,.==
q~-~tt~~I~~~id
714%
Non-Residential
$94.1
$96.2
$192.8
$174.6
$238.9
859%
815%
$129.3
$132.2
$26.1
$265.0
Total
*Projected based on current tax rate
** Projected based on the County Executive's Apri122
nd
proposed tax increase
Source: Department of Finance, OLO Analysis
r-~
.
"~~~Jn~tli~~
.
Residential
Non-Residential
$99
$2,618
$197
$5,077
$98
$2,459
__
~--
__
Average Annual Tax Bill, FYlO-FYll
~
~~
__
~=-~~
~e
99%
94%
*Projected
**Projected based on the County Executive's April 22
nd
proposed
tax
increase
Source: Department of Finance, OLO Analysis
Total Number of Consumers, FY10 and FYll
. .•. .
C:ateg6rY"j'A!~?
..
··'·FYIO
362,000
36,737
······ .s'·,FYllProjected
367,000
37,977
Residential
N on-Residential
Source: Department of Finance
Percentage of Total Tax Revenue
by Category, FY10 and FYll
Non-Residential
Total
72.8%
100%
72.8%
100%
*Projected
Source: Department of Finance - Based on the average of the
prior four fiscal years
Annual Tax Revenue, FY03-FYll
($
millions)
Residential
Non­
Residential
Total
*Projected
Source: Department of Finance
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SCENARIOS FOR ALLOCATING REVENUE BETWEEN RESIDENTIAL AND NON-REsIDENTIAL CONSUMERS
Scenario #1 - County Executive's Current Proposal (73/27 Allocation of Revenue)
i
Base Revenue ($132.2 million)
Additional Revenue ($133 million)
Total Revenue -
$265
million
Non-Residential (73%)
Non-Residential (73%)
$193 million (73%)
i
ar(27%).
1(27%)
n{2'-A.)
Scenario #2 - 66/34 (Non-Residential/Residential) Allocation of Additional Revenue
• Base Revenue ($132.2 million)
• Additional Revenue ($133 million)
Total Revenue -
$265
million
Non-Residential (73%)
Non-Residential
(66%)
S184 million (69%)
~
_
~
Scenario #3 - 60/40 (Non-Residential/Residential) Allocation of Additional Revenue
Base Revenue ($132.2 million)
Additional Revenue ($133 million)
Total Revenue -
$265
million
Non-Residential (73%)
Non-Residential
(60%)
(~7;~)
(40$)
(~40/0)
$176
million (66%}
Scenario
#4 -
50/50 Allocation of Additional Revenue
N on-Residential
..
Residential
=
Source for all: Department of Finance data, OLO analysis
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AVER.;\GE ANNUAL TAX BILL FOR RESIDENTIAL AND NON-RESIDENTIAL CONSUMERS
Scenario
#1-
County Executive's Current Proposal
(73/27
Allocation of Revenue)
$99
$197
$97 (98%)
Scenario #2 -
66/34
(Non-ResidentiallResidential) Allocation of Additional Revenue
Scenario #3 -
60/40
(Non-ResidentiallResidential) Allocation of Additional Revenue
Residential
$243
$143 (144%)
Scenario #4 -
50/50
Allocation of Additional Revenue
$99
$178 (179%)
*
Projected
Source for all: Department of Finance data, OLO analysis
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EXAMPLES OF MONTHLY
TAX
BILLS BASED ON ELECTRICITY USAGE
Scenario
#1-
County Executive's Current Proposal
(73/27
Allocation of Revenue)
Scenario #2 -
66/34
(Non-ResidentiallResidential) Allocation of Additional Revenue
l
Scenario #3 - 60/40 (Non-ResidentiaIlResidential) Allocation of Additional Revenue
Residential
154%
I
I
500
1,000
2,500
5,000
$3
$5
$13
$26
$7
$13
$33
$66
$4
$8
$20
$40 •
Scenario #4 - 50/50 Allocation of Additional Revenue
Source: Department of Finance data; OLO Analysis
I
To be filled in based on forthcoming data from the Department of Finance.