Agenda Item 17
IMFP/T
&E 1
May 18,2010
Public HearingIWorksession 2
MEMORANDUM
TO:
County Council
Management and Fiscal Policy/
Transportation, Infrastructure, Energy & Environment Committees
~
Michael Faden, Senior Legislative Attorney
Public HearingIWorksession 2:
Expedited Bill 29-10, Taxes - Excise Tax
Carbon Dioxide Emissions
FROM:
SUBJECT:
Expedited Bi1l29-1O, Taxes - Excise Tax - Carbon Dioxide Emissions, sponsored
by Councilmembers Berliner, Leventhal, and EIrich, was introduced on April 27, 2010. An
initial Management and Fiscal Policy/ Transportation, Infrastructure, Energy & Environment
Committee worksession was held on April 29, at which Committee members discussed the Bill
and related questions but took no action. A second joint Committee worksession is tentatively
scheduled for May 18 after the public hearing. If the joint committee has completed its review,
the Council could act on Bill 29-10, along with the other pending revenue measures, on May 19.
Summary of Bill 29-10.
The major provisions in Bill 29-10 include:
1) Tax levied.
Bill 29-10 would require a major emitter of carbon dioxide to pay an excise
tax of $5 per ton of carbon dioxide (see ©2, lines 17-19; 23-24). A "major emitter of
carbon dioxide" would be defined as a person who owns or operates a stationary source
of carbon dioxide that emits more than 1 million tons of carbon dioxide in a calendar year
(see ©2, lines 20-22). Bill 29-10 would allow the Council to increase or decrease the rate
by resolution (see ©2, lines 25-27). The tax would be payable monthly, unless the
Director establishes an alternate payment system (see ©3, lines 40-45). Councilmember
Berliner estimated that this tax could generate between $10 and $15 million/year in new
revenue (see ©6).
2) Interest and penalties.
If a person does not pay the tax due, the person would be liable
for:
• 1
%
interest on the unpaid tax per month for each month or part month after the tax is
due; and
• 5% of the amount of tax per month or part of a month after the tax is due, not to
exceed 25% of the tax (see ©3, lines 47-54).
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3) Unpaid taxes.
If a person does not pay the tax when due, Bill 29-10 requires the Director
of Finance to obtain sufficient information to calculate the tax due and assess the tax and
penalties against the person by mailing a notice of the tax due (along with interest and
penalties) to the person's last known address. The tax would be due within 10 days after
the notice (see ©4, lines 55-65).
4) Allocation ofrevenue.
Bill 29-10 would require 50% of the revenue generated from the
tax to be used to fund County greenhouse gas reduction programs (see ©4, lines 75-77).
Councilmember Berliner may offer an amendment to defer the revenue allocation during
the first fiscal year the tax is in effect.
5) Other provisions.
Other provisions in Bill 29-10, which are similar to other County
excise taxes, would:
• allow the Executive to issue Method (2) regulations to administer the tax (see ©3,
lines 36-38);
• require persons liable for the tax to preserve suitable records necessary to determine
the tax for
3
years and allow the Director of Finance to inspect and audit the records
(see ©4, lines 66-68); and
• make a failure to pay the tax when due a Class A violation (see ©4, lines 69-72).
Pre-introduction materials from Councilmember Berliner are attached at ©6-14. The
pro's and con's of this proposal are well articulated in these materials and the opposition letters
on ©19-26.
Fiscal and economic impact Annual revenue range: $11.7-17.6 million. See OMB
fiscal impact statement on ©15. Council staff concurs with OMB that "the eventual impact of
this tax increase on Montgomery County consumers is likely to be negligible."
Legal issue Council staff has not received any legal memorandum challenging the
validity of this tax under federal or state law. Our research and that of the County Attorney (see
County Attorney memo,
©
16) have not found any legal reason not to enact this tax. This tax
would be an exercise of the County's excise tax authority under state law, codified as County
Code §52-17, much like the energy tax. That authority has been upheld at least twice by the
Maryland Court of Appeals in decisions approving the former beverage container tax and the
transportation impact tax. As far as we have seen, nothing in the federal Clean Air Act or other
federal environmental laws, nor in the state air quality laws, would preclude the Council from
enacting this tax.
I
We believe, based on the caselaw referred to above, the Maryland courts
would treat this tax as a revenue measure, rather than a regulatory measure, because it simply
imposes a tax on a specific activity (emission of carbon dioxide) and does not otherwise regulate
the amount of or impose any sanction on that activity.
However, Council staff has been informed by a representative of Mirant Corporation,
currently the only likely taxpayer for this tax, that they expect to take legal action if this Bill is
'This conclusion could change if Congress enacts a federal climate change law that pre-empts various state and local
actions, as at least one pending proposal would. At the first Committee worksession, Councilmember Berliner noted
that he prefers a national regulatory/tax structure and of course would reexamine the County's authority if federal
legislation actually passes. Council staff concludes that any federal law beyond the Clean Air Act is too
hypothetical at this point to warrant County action or lack thereof.
2
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enacted. As the fiscal impact statement noted, "a legal challenge could delay the implementation
of the tax and receipt of the associated revenue for up to two years." In our view, if legal action
is indeed filed, the County will know fairly quickly if a Maryland court has enjoined collection
of the tax; thus the period of any initial revenue uncertainty would be more limited.
Technical amendments
The County Attorney did suggest some technical amendments
(see ©16), which Council staff concurs with and will insert in the Bill if the Committees
recommend enactment.
Berliner amendments
Councilmember Berliner, lead sponsor of this Bill, expects to
offer amendments that would:
1) allow a credit against the tax for any reduction in carbon dioxide emissions in the
County which can be attributed to carbon dioxide reduction programs funded by
revenue from this tax;
2) specify further the sources of any emissions data on which the tax would be based;
and
3) defer the allocation of revenue to greenhouse gas reduction programs during the first
fiscal year the tax is in effect.
For these amendments, see ©27.
This packet contains:
Expedited Bill 29-10
Legislative Request Report
Memo from lead sponsor
Carbon Tax fact sheet from co-sponsors
Pre-introduction statements:
Sierra Club
Chesapeake Climate Action Network
Dr. Matthias Ruth
Gino Renne
Pepco correspondence re ratepayer impact
Fiscal impact statement
County Attorney memo
Emissions data
Mirant opposition letter (sample)
Electric Power supply Association letter
International Brotherhood of Electrical Workers letter
Upper Montgomery County Volunteer fire Department letter
Amendments by Councilmember Berliner
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Expedited Bill No.
29-10
Concerning:
Taxes- Excise Tax ­
Carbon Dioxide Emissions
Revised: 4-8-10
Draft No.
~
Introduced:
April 27. 2010
Expires:
October 27.2011
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: .....:...:,No:::,:n.!-':e<------,,.--_ _ __
Ch. _ _, Laws of Mont. Co. _ _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmembers Berliner, Leventhal and EIrich
AN EXPEDITED ACT
to;
(1)
establish a reliable funding source for greenhouse gas reduction programs in the
form of an excise tax on major emitters of carbon dioxide;
(2)
set the rate of the tax and authorize the County Council to increase or decrease the
rate each year by resolution;
(3)
define certain terms, and authorize the County Executive to issue certain regulations;
(4)
provide for collection of the tax and payment of interest and penalties, set the
effective date of the tax, and apply certain provisions of law to this tax;
(5)
require part of the revenue from this tax to
be
used for certain greenhouse gas
reduction programs; and
(6)
generally amend the County laws governing excise taxation.
By adding
Montgomery County Code
Chapter 52, Taxation
Article XIII, Excise Taxon Major Emitters of Carbon Dioxide
Sections 52-95 through 52-99
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[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. 29-10
Sec. 1. Chapter 52 is amended by adding Article XIII, Excise Tax on
2
Major Emitters of Carbon Dioxide:
Article XIII. Excise Tax on Major Emitters of Carbon Dioxide.
52-95.
Findings.
The County Council finds that:
{ill
In December, 2009 the US Environmental Protection Agency found that
greenhouse gases in the atmosphere endanger both the public health and
the environment for current and future generations.
3
4
5
6
7
8
9
10
11
®
Montgomery County has embraced an 80
%
reduction in greenhouse
gas emissions.Qy 2050 and has begun to engage in programmatic efforts
to reduce these emissions.
These efforts constitute
~
significant
12
13
investment .Qy the County and its constituents and cover both stationary
sources (County owned and otherwise) and mobile sources.
14
15
16
17
18
W
52-96.
{ill
It
is appropriate that the largest emitters of carbon dioxide in the County
contribute to paying for these greenhouse gas reduction programs.
Tax levied; rates.
Any major emitter of carbon dioxide, as defined in subsection
ili1
must
file
~
tax return and
~
an excise tax each year on the privilege of
19
20
21
22
emitting carbon dioxide into the County airshed.
®
A major emitter of carbon dioxide is any person who owns or operates
any
station~
source of carbon dioxide located
in
the County that emits
more than
1
million tons of carbon dioxide
in
any calendar year.
23
24
W
@
The rate of the tax established under subsection {ill is $5 per ton of
carbon dioxide emitted.
The County Council .Qy resolution, after
~
25
26
27
public hearing advertised
under Section 52-17(c), may increase or decrease the rate set in
subsection
!f1
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BilI4.Doc
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.
28
EXPEDITED BILL
No. 29-10
W
As used in this Article:
29
30
31
ill
Ton,
when applies to carbon dioxide in gaseous fonn, means the
amount of gas in cubic feet which is the equivalent of 2000
pounds on
f!
molecular weight basis.
32
33
34
35
36
37
38
ill
ill
Director
means the Director of Finance.
Person
includes
any
individual,
business,
corporation,
association, finn, partnership, group of individuals acting as
f!
unit, trustee, receiver, assignee, or personal representative.
ill
By regulations issued under method
ill
that are consistent with this
Article, the County Executive may further specify the administration of
this
-
-
tax.
52-97.
Due date.
39
40
41
ill
The tax levied under Section 52-96 is due and payable for each month
on the last day of the next month.
42
43
44
45
46
47
48
49
50
51
52
53
54
®
The Director may establish an alternative payment system.
If an
alternative payment system is established, the Director must require
£!:
pro-rated payment for any taxable period that ends before the system
takes effect.
52-98.
Collection; interest and penalties; violation; lien.
ill
If any person does not
P£!:Y
the Director the tax due under Section 52-96,
that person is liable for:
ill
interest on/the unpaid tax at the rate of one percent per month for
each month or part of
£!:
month after the tax is due; and
ill
f!
penalty of
2.
percent of the amount of the tax per month or part
of
f!
month after the tax is due, not to exceed 25 percent of the
tax.
The Director must collect any interest and penalty as part of the tax.
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ExPEDITED BILL
No. 29-10
55
56
@
If any person does not
IillY
the tax when due, the Director must obtain
information on which to calculate the tax due. As soon as the Director
obtains sufficient information on which to calculate any tax due, the
Director must assess the tax and penalties against the person.
The
57
58
59
Director must notify the person of the total amount of the tax, interest,
and penalties
Qy
mail sent to the person's last known address. This
notice is prima facie evidence of the tax due; entitles the County to
judgment for the amount of the tax, penalty, and interest listed in the
notice; and gives the taxpayer the burden of proving that the tax has
been paid or any other sufficient defense to the action. The total amount
due must be paid within 10 days after the date of the notice.
60
61
62
63
64
65
66
67
68
69
W
Every person liable for any tax under Section 52-96 must preserve for
J
years suitable records necessary to determine the amount of the tax.
The Director may inspect and audit the records at any reasonable time.
@
Any failure to
IillY
the tax when due under Section 52-97, and any
violation of Section 52-97 or this Section, is
f!
Class A violation. Each
violation is
f!
separate offense. A conviction under this subsection does
not relieve any person from paying the tax.
70
71
72
73
ill
52-99 .
Section 52-18D applies to this tax.
74
75
76
Allocation of Revenue.
Of the revenue from the tax levied under Section 52-96,50% must be reserved
for and allocated in the annual operating budget to funding for County greenhouse
gas reduction programs, including mass transit.
77
78
79
Sec. 2.
Expedited Effective Date.
The Council declares that this Act is necessary for the immediate protection of
the public interest. This Act takes effect on the date when it becomes law.
80
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LEGISLATIVE REQUEST REPORT
Expedited Bill 29-10
Taxes- Excise Tax
-
Carbon Dioxide Emissions
DESCRIPTION:
PROBLEM:
Implement an excise tax on major emitters of carbon dioxide
The Environmental Protection Agency has found that greenhouse
gases in the atmosphere endanger both the public health and the
environment for current and future generations. County programs to
reduce greenhouse gases have suffered from lack of funds.
To find a steady source of funds for programs to reduce greenhouse
gas emissions by taxing the major producers of those emissions.
Finance Department, Department of Environmental Protection
To be requested.
To be requested.
To be requested.
To be researched.
Michael Faden, Senior Legislative Attorney, 240-777-7905
Taxes apply County-wide.
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
See proposed §52-98.
f:\law\bills\1029 carbon tax\legislative request report. doc
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MONTGOMERY COUNTY
COU
'·iCll
ROueR 9EiRLINER
COIJNCJLMCMI'H:~
DISTRICT I
Good day to you all and Happy Earth Day.
I can not think of a better way to honor Earth Day than by taxing the single biggest threat
to our earth the burning of coal in power plants.
In Montgomery County, the Mirant coal fired power plant is by far and away the single
largest emitter of greenhouse gases. It's C02 emissions alone represent approximately
25% of the total amount of greenhouse gas emissions in the County.
At the same time, our County is struggling to make ends meet, and we need new sources
of revenues.
My proposed carbon tax is a responsible approach to addressing both our environmental
and fiscal imperatives. It will generate between $10 and $15 million a year in new
revenues and it will incentivize Mirant to reduce its emissions. These dollars will
provide just a portion of the resources necessary to pay for the carbon reducing programs
our County and our citizens support. It is only right that Mirant should pay its fair share
of those costs.
.
And unlike every other tax we are considering, this tax will not be felt by Montgomery
County residents. Why? Because our power is bought on a competitive basis, and if
Mirant's power is not priced competitively, it will not be bought. Plain and simple.
I am sure that Mirant will fight this tax. They have fought their own shareholders who
have argued that Mirant should be doing more to reduce their emissions. But I did not
proceed with this proposal without first having our lawyers review it. They concluded, as
have I, that we have the legal authority to impose this tax.
While all of us here would prefer for there to be strong regional or federal standards, the
truth is we don't today. And it is also true that local governments often take the lead on
this issues, and as result of those initiatives, there is a greater push for federal legislation.
That would be a good outcome. But until then, we have the authority and we must use
that authority on behalf of our taxpayers and the health and wellbeing of our residents.
I am pleased that within a span of hours, two of my colleagues immediately asked to join
as co-sponsors. Councilmember Leventhal, who himself has been a strong champion for
the environment for many years, and Councilmember EIrich.
Let me ask them if they would like to say a few words now before turning to two of the
leading environmental advocates in our community.
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MONTGOMERY COUNT" COUNCil
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DISTRICT I
A CARBON TAX FOR MONTGOMERY COUNTY
SPONSORED BY COUNCILMEMBER ROGER BERLINER
CO-SPONSORED BY COUNCILMEMBERS ELRICH AND LEVENmAL
This legislation will establish an excise tax on major emitters of carbon dioxide that do business
in Montgomery County. The County has been working diligently to reduce its green house gas
inventories and shrink its carbon footprint.
It
is time for those who contribute to this pollution to
pay their fair share.
• EPA and the State of Maryland have determined that carbon dioxide emissions pose an
unacceptable risk to public health and our environment.
• Montgomery County is committed to reducing green house gas emissions by 80% by
2050.
• Carbon Dioxide is a greenhouse gas.
• It is appropriate, fair, and good public policy for those contributing to the County's
greenhouse gas emissions inventory to also contribute to help finance its reduction
programs, including the Home Energy Loan Program, Clean Energy Rewards, and
transit.
• This proposal calls for a tax on any carbon emitter who pollutes over one million tons of
carbon dioxide in a calendar year.
• The Mirant power plant emits over 3 million tons of carbon dioxide a year at its
Dickerson, Maryland location, by far the largest single source of greenhouse gas
emissions in the County.
• At $5 per ton this tax will generate more than $15 million a year for the County and
create an additional economic incentive for Mirant and any others to reduce emissions.
• A $5 per ton tax on Mirant will have NO DISCERNABLE impact on PEPCO ratepayers
according to Pepco officials who have analyzed the proposed tax. PEPCO buys its power
in an auction; if Mirant's power is not competitive, it will not be purchased; and Mirant
does not have enough "market power" to raise the price of power unilaterally.
• At the end of2009, Mirant had approximately $2 billion in cash and power plants
throughout the mid-Atlantic
&
Northeast, and in California. In its 10-K filing with the
SEC, Mirant observed that "[fJuture
local,
state and federal regulation of greenhouse
gases is likely to create substantial environmental costs for us in the form of
taxes
or
purchases of emissions allowances and/or new equipment."
• A $5 per ton tax complements the existing Regional Greenhouse Gas Initiative (RGG!), a
regional cap-and-trade program.
• According to the state's leading experts, a $5 tax is equivalent to the estimated value of
allowances under RGGI ifMirant's allocation were reduced by 10% from the current,
steady-state levels permitted through 2014.
• The County has the legal authority to impose an excise tax on carbon.
• In the absence of a strong national program, local governments must continue to lead.
• If adopted, Montgomery County will be the first county in the country to impose a carbon
tax on major emitters.
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SIERRA
CLUB
Montgomery County Group
April 21, 2010
Contact:
David Hauck
Chair
Sierra Club, Montgomery County Group
(301)-270-5826
Hauck_ d@msn.com
The Montgomery County Sierra Club strongly supports Councilmember Berliner's bill that
would impose a fee on major emitters of carbon dioxide within the county. Carbon dioxide
emissions are the primary cause of global climate change and steps must be taken now to reduce
this carbon pollution. For too long there have been no costs associated with releasing
greenhouse gases into the atmosphere. For too long major producers and users of fossil fuels
have said we can't afford to put a price on carbon emissions. The truth is that the costs of global
climate change far outweigh the costs of reducing greenhouse gas emissions.
This bill recognizes that truth and includes two key provisions:
• it places a specific price on carbon dioxide--$5.00 a ton-that lets large emitters know
exactly how much their contribution to global climate change will cost them in the future,
as well as how much reducing their carbon emissions can save them.
• it dedicates half ofthe money raised by the fee to the county's greenhouse gas reduction
programs which help homeowners, renters and businesses save energy, reduce their
carbon emissions and lower their utility bills.
The Montgomery County Sierra Club recognizes the hard work and creative thought
Councilmember Berliner has demonstrated in finding ways for Montgomery County to have an
impact on reducing greenhouse gas emissions. This bill is the next step in that effort and we
look forward to its being enacted.
103 North Adams Street
Rockville, MD 20850
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Statement from the Chesapeake Climate Action Network:
Montgomery County "Carbon Tax" on Big Polluters is a
Key Step Toward Protecting Kids and Our Climate
Earth Day, April 22, 2010
From CCAN Director Mike Tidwell:
"On Earth Day 20 I 0, I salute Councilmember Roger Berliner for proposing one of
America's first county-based carbon taxes on major polluters. The County Council
should pass this bill as soon as possible. This much-needed legislation will apply to only
one company: The Mirant Corporation, owner of the massive, coal-fired power plant in
Dickerson, Maryland. The Dickerson plant is by far the largest carbon polluter in the
county, and Mirant is one of the largest carbon polluters in America. Unfortunately the
company has a long history of contaminating our air and our watersheds in Maryland
without voluntarily acting to protect the public from its pollution. In 2006 alone, Mirant's
Chalk Point plant in Prince George's County, Maryland, recorded 1400 violations of the
Federal Clean Air Act for burning dirty "bunker oil" without a permit. Mirant fought
tenaciously against Maryland's landmark Healthy Air Act passed by the General
Assembly in 2007. And just last month, the Maryland Department of the Environment
filed a lawsuit alleging Mirant violated federal Clean Water Act regulations at its coal
waste landfill in Prince George's County. And in 2006, CCAN raised serious concerns
about the Dickerson plant's continual violation of the state's nitrous oxide standard
during summer months.
"The Montgomery County carbon tax is a wise and much-needed response to Mirant's
long-established pattern of serious pollution. The bill would not discernibly affect
ratepayers. It would, however, generate much-needed funding for county-sponsored
greenhouse gas reduction efforts. Until Congress finally acts to generate a nation cap on
carbon pollution, every county in Maryland and every 'county in the country should
follow Roger Berliner's lead today."
(j)
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Statement of DR. MATTHIAS RUTH
Roy F. Weston Chair in Natural Economics
Director, Center for Integrative Environmental Research,
Division of Research
Director and Professor, Environmental Policy Program,
School of Public Policy
Co-Director, Engineering and Public Policy Program,
A. James Clark School of Engineering and School of Public Policy
University of Maryland
The State of Maryland and Montgomery County have begun to establish themselves as
leaders in the Nation in dealing with the global challenge of climate change. Maryland
has signed on to the Regional Greenhouse Gas Initiative (RGGI) - a cap and trade system
in which the state sets upper limits on greenhouse gas emissions and auctions off permits
to utilities. Through the auction process, a price for carbon and other greenhouse gases
gets established, incentives are provided to utilities to reduce the costs of purchasing
permits, and revenues are generated to the state. In essence, the state sets emissions
targets, and the market determines the price of emissions. Recent experiences with cap
and trade in the state suggest that the emissions targets are not particularly ambitious.
As a result low prices for carbon and comparatively low state revenues result.
With the introduction of the carbon dioxide tax proposed in Councilmember Berliner's
bill, the county recognizes that there is considerable room to improve on RGGI. The tax
will live up to our expectations to really be environmental leaders by doing what is
needed to cut greenhouse gas emissions. In doing so, the county will provide the right
incentives to cut emissions, generate revenue to foster efficiency improvements, and
break out of the ideological logjam that has, to date, prevented taxes from being used as
means to guide action: RGGI has been an important step in promoting smaller carbon
footprints, but the cumbersome constraints put on it actually do not lead the market to
reign freely. The tax proposed here, instead, helps set the price of carbon dioxide directly
at a more meaningful level, and then lets the market sort out optimal emission quantities.
Introducing this tax is a clever way of leveraging the innovative capacity of power
generators, and stimulating markets for clean technology and efficiency improvements.
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Gino Renne
President
Municipal and County Government
Employees Organization
My name is Gino Renne; I am President of Local 1994. Our union represents 10,000
workers throughout the state of Maryland.
Before I begin, I want to take the opportunity to thank Roger for taking the lead on this
and his two colleagues George and Marc for signing on. I urge the County Council to
unanimously adopt this initiative as soon as possible. I also want to thank the other
esteemed leaders for their support as well.
I'm going to speak to two points: the fiscal piece first. Our local union's position
throughout these deliberations has been that we need to find a fair and balanced approach
to sustaining the public services that our workers deliver. And this fulfills that request.
The entire community has to come together and we all have to do our fair share to make
sure we sustain the public services that this community demands.
On the environmental issue, this is a much-needed, as I see it, public health and safety
initiative. The entire state of Maryland will benefit from it, and adjoining states as well.
As you well know, depending on the wind flows and what have you, surrounding states
are impacted by the emissions up in Dickerson as well.
So this is a public safety and public heath initiative as well and I applaud Roger and his
colleagues for moving
it
ahead.
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MONTGOMERY COUNTY COUNCIL
ROCKVILLE,
MARYLAND
OFFICE OF COUNCILMEMBER
ROGER BERLINER
April 14, 2010
Mr. Thomas Graham
President
Pepco Region
701 Ninth Street, NW
Washington, DC
Dear Tom:
I want to express my appreciation to you and your senior staff for taking the time to
review my proposed legislation that would impose a $5 per ton carbon tax on the County's major
emitters of greenhouse gas emissions.
In particular, your staffs expertise with respect to the operation of the Mirant power
plant at Dickerson, a plant that had been owned and operated by PEPCO, and the potential
impact of this legislation on Montgomery County ratepayers was extremely valuable. As you
appreciate, that power plant all by itself contributes approximately 25% of the County's total
greenhouse gas emissions, and almost 40% of the emissions from all stationary sources within
the County.
One of the first questions I am asked about this legislation is the potential impact on
ratepayers. Your staff's bottom line conclusion that the bill will have
"no discernable"
impact
on ratepayers is a major consideration.
As we discussed, this conclusion was based on the fact that PEPCO buys its long-term
power for its residential customers at auction, and at auction, PEPCO buys the least expensive
power. Accordingly, your staff has concluded that ifMirant's power is priced competitively
with other base load power from plants that do not pay a carbon tax, you will buy it. IfMirant's
power is not competitively priced, you will not.
To the extent that PEPCO buys power on the spot market, and to the extent to which the
Mirant power plant sells power on the spot market, Mirant's power would never affect the price
of spot market supplies in the PJM power pool except on those occasions when the plant is
literally the "marginal cost" supplier. As your staff explained, this would be a most
100
MARYLAND
A
VENUE' ROCKVILLE, MARYLAND
20850
2401777·7828 • TTY 2401777-7914 • FAX 2401777-7989
Councilmember.berliner@montgomerycountymd.goy
www.molltgomerycountymd.g~y
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..uncommon.. situation, perhaps happening for a few hours, given that natural gas and other more
expensive supplies typically establish the marginal, peak price.
While there are many public policy reasons why a carbon tax on the County's major
emitters is sound public policy, PEPCO's conclusion that the legislation will not have any
discernable impact on ratepayers is itself a significant plus. Your analysis in this regard is quite
similar to the analysis of Dr. Mathias Ruth at the University of Maryland, a recognized state
expert and authority, who also has stated that any impact would be "quite minimal."
I understand that you will be testifying on this legislation after it is introduced, and I look
forward to you assuring my colleagues and our community that should we decide to adopt this
revenue raising legislation, we can do so confident that our County ratepayers will not
experience any "discernable" effects other than the positive effect of having $15 million more
dollars to deal with our budget crisis.
Sincerely,
Roger Berliner
Councilmember
District 1
100
MARYLAND
A
VENUE' ROCKVILLE, MA RYLAND
20850
2401777-7828
TTY
2401777-7914
FAX
2401777-7989
Councilmember.berliner@montgomerycountymd.gov
www.moiltgomerycountymd.gov
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~pepco
A PHI Company
Kim
M.
Watson
Vice President -Maryland Affairs
701 Ninth Street, NW
Suite 9212
Washington, DC 20068
(202) 872-2524
kmwatson@pepco.com
April 28, 2010
The Honorable Roger Berliner
Montgomery County Council
100 Maryland Avenue
Rockville, MD 20850
Dear Councilmember Berliner:
I am writing to provide clarity with respect to Pepco's analYSis of the impact of the
$5-per~ton
carbon tax recently proposed by your office. Pepco is unable to quantify
what, if any, impact the tax would have on ratepayers, if passed into law,
Because of the confidential nature of the bids at the power auctions and several other
unknown variables, Pepco is not in a position to opine on any impact of various financial
obligations of any of the bidding companies (including Mirant). By extension, the
Company cannot discern how the financial obligations of any individual bidder will impact
ratepayers. For that reason, it is important to clarify the Company's position and make
clear that no conclUSion with respect to ratepayer impact can be made by the Company.
Please contact my office if you have any questions regarding this matter.
l~~Jl~JYCC~
Sincerely,
r,
i .
I
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Jjt
tiL­
5d'
rLL
056886
OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
MEMORANDUM
Joseph
F.
Beach
Director
,'­
May 13,2010
TO:
FROM:
SUBJECT:
Nancy Floreen, President, County Council
Joseph F. Beach.
Direct~
;
Expedited Bill 29-1 0,
T~cise
Tax-Carbon Dioxide Elllissions
c:
-1
The purpose of this memorandum is to transmit a fiscal and economic impact statement
to the Council on the subject legislation:
LEGISLATION SUMMARY
This bill will establish
an
annual excise
tax
of$5 per ton for major emitters of carbon dioxide
in
the
County. A "major emitter" is defined as any entity that owns or operates a stationary source of carbon
dioxide located
in
the County that emits more than 1 million tons of carbon dioxide in any calendar year.
The bill provides for the monthly collection ofthe
tax,
as well as penalties ifthe
tax
liability is not paid.
At least 50% of the revenue from this
tax
must
be
used to fund the annual operating budget that supports
the County's greenhouse gas reduction programs, including mass transit.
nSCALANDECONOMcrCSUMMARY
It
is estimated that this
tax
will produce annual revenue ofS11.7 - $17.6 million, based on available esti­
mates of C02 emissions from major emitters located in the County. (The higher figure is based on EPA's
2005 EGrid estimate of C02 emissions from major emitters located in Montgomery County and is the
most authoritative figure available.)
This bill
is
not expected to impose significant additional costs on the County, either for administration of
the
tax
or for defending possible legal challenges to the tax. However,
a
legal challenge could delay the
implementation ofthe tax and receipt ofthe associated revenue for up
to
two years.
Based on the EGrid report cited above, major emitters located in the County would need to receive an
additional $0.00487
per
kilowatt-hour for power generation to offset the impact ofthe tax. However,
wholesale electricity markets are regional, and the eventual impact ofthe tax increase on Montgomery
County consumers is likely to be negligible.
The following contributed to and concurred with this analysis: John Greiner, Office of
Management and Budget; Eric Coffman, Department ofEnvironmental
Protection~
Robert Hagedoom,
Department of Finance; and Marc
Hansen,
Office ofthe County Attorney.
JFB:jg
Office of the Director
101 Monroe Street, 14th Floor' Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd_gov
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OFFICE OF THE COUNTY ATTORNEY
Isiah Leggett
County Executive
Marc P. Hansen
Acting County Attorney
MEMORANDUM
TO:
Stan Edwards, Division Chief
Department of Environmental Protection
FROM:
'~
.
../J'~
Scott R. Foncannon
Associate County Attorney
~("\.
Marc P. Hansen
/Y]C!,,-,
t
Acting County Attorney
May 5,2010
Expedited Bill 29-10, Taxes-Excise Tax-Carbon Dioxide Emissions
('-'­
VIA:
~
DATE:
RE:
I have had an opportunity to review Expedited Bill No. 29-10, Taxes-Excise Tax-Carbon
Dioxide Emissions.
In
my opinion the bill is within the authority of the County Council and the
bill is legally sufficient.
I have the following additional comments concerning the bill. Section 52-98 requires any
person subject to the tax to pay thetax which is due to the Director. I would recommend that
this provision be amended to require any person that is required to pay the tax to pay the tax and
file monthly reports on such fonns as the Director of Finance may require. With these types of
excise taxes it's the regular procedure for the Director of Finance to develop a report fonn for the
taxpayer that is in a fonnat easily recognizable and understandable by the Department of
Finance. This tax return or report should accompany the payment made to the County.
In
addition, Section 52-98(b) should authorize the Director to estImate the tax if the
taxpayer fails to pay the tax or file the report when it is due. For ease of administration it would
be appropriate to authorize the Director to use the previous months report and payment as a basis
for calculating the tax for the next month or in the alternative to use the best available
infonnation rather than requiring the Director to obtain infonnation. There is a similar provision
in Section 52-15(c) and (d) of the telephone excise tax and 52-14(c) and (d) of the fuel energy
tax.
101 Monroe Street, Rockville, Maryland 20850-2580
(240) 777-6795 TID (240) 777-2545. FAX (240) 777-6705. scottJbncannon@montgomerycountymd.gov
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Stan Edwards, Division Chief
May 5,2010
Page 2
I have no further comments on this bill.
cc:
Kathleen Boucher, Assistant Chief Administrative Officer
Office of the County Executive
SRf:jq
Al 0-00774 - Memo re: Expedited Bil129-10
M:\Cycom\Wpdocs\D004\P009\00139460.DOC
(.
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Mirant Dickerson Plant Carbon Dioxide Emissions (C02)
Source: United States Environmental Protection Agency,
Egrid
2007 (2004
plant data)
16.00
1
Mirant vs Montgomery County Community Emissions
200412005
Mirant Approximately 25%
of Community Emissions in
2004/2005
14.001
12.00
=
l
10.00
l
8.00
6.00
4.00 ______ _
2.00
0.00
1
j
+---~-~
Mirant Dickerson
Plant C02
Emissions
1
Montgomery County
Community
Emissions (C02
Equivalent)
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M I RAN T'
May 10,2010
Chevy Chase, MD 2U815-3102
Re: Potential Electric Cost Hike in Montgomery County
Dear
This letter is to share news about the potential of a $15 million increase to electricity
prices. I write to ask for your help to stop this unnecessary increase that could be passed
along to consumers.
You're probably asking yourself, "Who is Mirant and why are they writing me?"
We generate electricity. In fact, our Dickerson Power Generating Station is the only
major power producer in Montgomery County. Our facility generates 843 megawatts of
power, enough to supply every home and most businesses in the county.
Yet when you flip on a switch and the lights go on, or your air conditioner hums as it
cools a hot and humid Maryland summer night, or your office buzzes with technology,
you don't think of us.
That is because all we do is generate electricity. We don't sell our power directly to
customers. All the power we produce is sold on the wholesale market where your utility
purchases it and charges you for delivering it to your home.
Now some members of the Montgomery County Council propose to increase
electricity costs by an additional $15 million. Join us so we can defeat this increase,
right now.
We know that with every dollar electric bills go up, businesses and families feel the pain.
Apparently not everyone understands that pain. Some on the County Council are
attempting to sneak through a new $15 million fee on generating electricity. If approved,
this purported "carbon tax" would increase the cost to make electricity to power homes
and businesses.
@
Dickerson Generating Station· 21200 Martinsburg Road· Dickerson, MD 20842 • 301.560.6335
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Clearly, Mirant has a vested interest in fighting this carbon bill.
It
would hurt us,
especially the employees who work at the Dickerson Generating Station and their
families. But this bill will hurt many more people and business, too.
You know that this bill will make the price of electricity go up.
It
is simple economics: if
you make it more costly to produce electricity, it in turn costs more for consumers to buy
electricity.
The scheme will also result in the importation of "dirty" power from West Virginia,
Ohio, and Pennsylvania, creating more emissions from power plants in states with less
stringent environmental regulations. This imported power could necessitate building
more high voltage transmission lines that cut through forests and farmland.
Maryland's air is already polluted from these plants, because air pollution doesn't respect
borders. The Maryland Department of the Environment says 70 percent of the air
pollutants in Maryland come from out-of-state airflows from the west.Montgomery
County, unfortunately, is a collecting point for the dirty air from the Ohio River Valley.
Today we produce cleaner energy at a lower cost.
Maryland has the toughest emission standards on the East Coast. To meet those emission
standards, Mirant just spent nearly half-a-billion dollars to install clean air scrubbers at
the Dickerson Station. The benefit of this major air improvement will be lost if our
cleaner electricity is no longer economically viable.
This bill fails on every level. Its sponsors argue it's for the sake of the environment, but
in reality it makes matters worse, simply shifting C02 emissions to dirty plants in other
states and increasing other air pollutants in Maryland. The Montgomery County carbon
bill is bad policy. That is probably why NO other county, city, or town in the country has
created a similar tax. Join us in fighting this increase to electricity prices by joining our
effort at www.NoMoCoTaxHike.com and or call us at (301) 560-6335.
With your help, we can stop this scheme.
Sincerely,
~777~
Misty Allen
Director External Affairs
Mirant Mid-Atlantic, LLC
P.S. If you do not speak out, this measure will pass, prices will increase and air quality
will decrease.
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·
~
Page.1 of
1
Guthrie, Lynn
From:
Sent:
To:
Floreen's Office, Councilmember
Friday, April 30, 20102:05 PM
Montgomery County Council
Subject: FW: Carbon Tax Opposition Letter
056500
-----Original Message----­
From:
John Sheik [mailto:JShelk@epsa.org]
Sent:
Friday, April 30, 2010 10:41 AM .
To:
Andrew's Office, Council member; Eirich's Office, Councilmember; Ervin's Office, Council member; Floreen's
Office, Councilmember; Knapp's Office, Councilmember; Leventhal's Office, Councilmember; Navarro's Office,
Councilmember; Trachtenberg's Office,Councilmember
Subject:
Carbon Tax Opposition Letter
Attached please find a letter in opposition to the proposed county carbon tax.
For the reasons outlined in the letter, the proposal will not accomplish the claimed objectives. It is both bad
environmental and fiscal policy.
John E. Sheik
President & CEO
Electric Power Supply Association (EPSA)
1401 New York Avenue, N.W., 11th Floor
Washington, D.C. 20005
202-628-8200 (main)
202-349-0154 (direct)
703-472-8660 (cell phone)
202-628-8260 (fax)
www.epsa.org
:~
o
EMAIL CONFIDENTIALITY NOTICE: This e-mail message is intended solely for the
addressee(s) and may contain confidential and/or legally privileged information. If you are not
the intended recipient, or this email was addressed to you in error, you should deleted this
message and any attachments, and you are notified that disclosing, copying, distribution, or
taking action in reliance on the content of this information is strictly prohibited.
4/30/2010
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Electric Power Supply Association
Advocating the
powvr
or compebtiOn
John E. SheIk
President and CEO
1401
New York Avel1\l6, N'N
11111 Floor
Washington. DC 20005
2021'628.8200
2021628.8260 fax
I"IW'IMpsa.org
April 30. 2Q10
Honorable Roger Berliner
Montgomery County Council
100 Maryland Avenue.
Rockville, MD 20850-2322
Dear Councilmember' Berliner:
This letter is prompted by your proposal to impose a $5 per ton carbon tax in
Montgomery County. The Electric Power Supply Association (EPSA) does not normally
comment on county legislation. However. as your news release stated. this is an
unprecedented. and we believe, unfortunate proposal. For the reasons stated below,
the proposal is neither good environmental policy nor a stable source of county
revenue.
EPSA is the national trade association for competitive wholesale suppliers, including
those who provide the electricity in the regional PJM Interconnection that serves
Maryland. EPSA seeks to bring the benefits of competition and environmental
stewardship to all power customers.
It is important to know that in January 2007 EPSA became the first national multi-fuel
electriCity trade association to call for a uniform federal program to substantially reduce
national economy-wide carbon emissions. The EPSA Board of Directors adopted these
climate change principles unanimously, including with the support of Mirant, the owner
of the only power plant
in
the county.
In addition, Maryland has joined the Regional Greenhouse Gas Initiative (RGGI). which
includes ten states in a regional cap and trade system. This system already charges
generation resources for carbon emission allowances, as would your proposed county
legislation, but RGGI addresses all generation resources in its region. In effect, your
proposal would operate to the disadvantage of the existing program, which addresses
greenhouse gases on a regional basis rather than a local basis. Your proposal works
only to single out one generation resource.
The proposal is intemally inconsistent on its face. At a minimum it could not
simultaneously achieve both the fiscal and environmental objectives claimed, and in fact
would not likely achieve either one of them to the extent claimed.
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With regard to fiscal policy, the description claims that it would raise at least $15 million
per year. This erroneously assumes that the current level of emissions subject to the
tax would continue to occur. Despite a headline in the news release suggesting that the
proposal would apply to multiple IImajor emitters" the proposed tax would actually apply
to only one facility, the county's sole power plant. However, your materials on the
proposal correctly acknowledge that PEPCO and competitive retail suppliers purchase
the power supplied to county residents, businesses, government agencies and others
through PJM. The proposal also notes that when the price bid into PJM by the plant is
not competitive, it wit! not run. A $5 per ton carbon tax that would only apply to a single
power plant out of over
1.200
generating plants in PJM would increase the likelihood
that such a single plant would run less often. When not operating, or when running less
often than currently, the plant would nothave any or fewer emissions subject to the tax
and thus the tax would not generate any revenue or much less revenue than claimed.
As to environmental policy, the proposal concedes that the power needed to keep the
lights on in the county would come from somewhere else in PJM. Given the fuel mix in
PJM, much of the time this replacement power will come from power plants with carbon
dioxide emissions equal to if not greater than the county's sole power plant. As a result,
no net carbon reductions would occur and in fact carbon emissions associated with
electricity consumed in the county may actually increase. As you are well aware, the
environmental impact of a ton of carbon emissions from sources outside the county has
as great an impact on the environment as a ton of carbon emissions from inside the
county.
Furthermore, Maryland has a state law on non-carbon emissions that is substantially
more stringent than other states in PJM. As a result, to the extent that replacement
power comes from outside of Maryland (which is a net importer of electricity) it is likely
that the emissions of pollutants such as SOx; NOx and mercury will increase as a result
of your proposal, circumventing Maryland's state efforts. Mirant and other power plant
operators in Maryland have spent billions of dollars to comply with this recent state law.
Far from being an incentive to reduce carbon emissions, as your proposal claims, the
proposed tax would be a disincentive because plants could not recoup the costs of
doing so. This is in part why a national carbon reduction policy is by far the preferred
approach along with similar efforts internationally.
Thank you for the opportunity to provide these comments on your proposal.
n E. Sheik
President and CEO
Electric Power Supply Association
CC:
Montgomery County Council
@
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Local Union 1900
Of The
International Brotherhood Of Electrical Workers
John L. Holt
PresidentlFinancial Secretary
Representing the Employees of
Business Manager
Potomac Electric Power Co., Mirant Mid-Atlantic and Frederick Gas Co.
Greg Waller
V ice President
Executive Board Chairman
1400 Mercantile Lane - Suite 208 - Largo, Maryland 20774
Office: (301) 322-6030
Fax:
(301) 322-6181
Karl Furbush
Recording Secretary
Business Representative
Ernest Harrison
Treasurer
April 29, 2010
056499'
The Honorable Nancy Floreen
President, Montgomery County Council
100 Maryland Avenue
Rockville, MD 20850
Re: Expedited Bill 29-10, Taxes - Excise Tax - Carbon Dioxide Emissions
Dear Ms Floreen:
I am writing as President of the IBEWLocal1900 representing more than 1700 members and our 97 members at Mirant's
Dickerson Generating station. IBEW strongly opposes to EB 29-10 the local electrcity gereration tax.
We appreciate your support for labor issues but this bill will discourage job creation and jeopardize current
union jobs. Our members recently helped complete Mirant's nearly $400 million environmental upgrade at its
Dickerson facility. This upgrade significantly reduces air pollution emissions in compliance with Maryland's
Healthy Air Act.
This new tax will have the direct effect of making the Montgomery County facility less competitive in the electricity
market resulting in less operating time of the facility. This has both economic and environmental consequences to the
residents and businesses of Montgomery County and the region. First, the potential expansion and future investment in
the facility to grow the already $4 million a year tax base is jeopardized, risking existing and future jobs. Secondly, with
respect to the environment, when the Dickerson station is running less, the demand for power must be satisfied elsewhere.
And, given the way the electricity grid operates, that power will be imported from power plants outside the state of
Maryland with less stringent environmental standards.
On
behalf of the approximate 150 employees of the Mirant Dickerson station and 1200 members of the IBEW Local 1900
in Maryland, we are very concerned that this tax sends the wrong message about the future growth and job creation on the
part of Mirant and other businesses in Montgomery County.
We urge you to oppose EB 29-10 and to support economic expansion and job creation.
2t
..
incerel,
~
'
I
W
ohn
L.
Holt, President!
Business ManagerlFinancial Secretary
LB.E. W. Local Union
1900
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UPPER MONTGOMERY COUNTY
VOLUNTEER FIRE DEPARTMENT, INC.
19801 BEALLSVILLE ROAD
P.O. BOX 8
BEALLSVILLE, MARYLAND 20839
(301) 972-8888 • FAX (301) 407-0453
www.umcvfd.org
May 12, 2010
Nancy Floreen, President
Montgomery County Council
100 Maryland Avenue
Rockville, MD 20850
056888
Re: Expedited Bill 29-10, Taxes - Excise Tax, Carbon Dioxide Emissions
Dear Ms. Floreen:
I am representing the Board of Directors of the Upper Montgomery County Volunteer
Fire Department which serves approximately 12,000 citizens in an 80 square mile first
due area in the Western Montgomery County. The Mirant Mid-Atlantic (Mirant)
Dickerson power generating station is located in this area. The members of the Board of
lTMCVFD wish to go on record as strongly opposing EB29-1 0, the local electricity
'.
'.
....
generation tax, for a number ofreasons.
.
.
-.
~
.
.
For many years, the Mirant Mid-Atlantic Organization has been known to be a safety-
conscious community centered organization. The Mirant Organization has spent $400
million dollars to upgrade their generating station to meet stringent Federal and State
mandates. The Mirant Organization has also been an active supporter of Community
events here in Western Montgomery County. Mirant has funded efforts of the local
schools to make the area a greener, healthier place to live. Local towns have also received
support from Mirant for a number of projects and ongoing celebrations such as the
Annual Poolesville Day that is enjoyed by thousands each year. Mirant has supported
swift water rescue training opportunities for MCDFRS employees, provided equipment
and funding for cave in disaster preparation and training, and has supported 'Wilderness
Medical Training by donating the use of their site to the classes each year.
While the County's need to generate revenue is not in question, the UMCVFD objects to
a bill that affects a single private business entity in one geographic area of the county.
Bill EB29-1 0 would negatively impact the citizens of the Western Montgomery County
area in a number of ways. All the surrounding jurisdictions of Boyds, Barnesville,
Poolesville
&
Dickerson would feel the impact due to the fact that Mirant would have no
recourse except to withdraw support from the many community activities they now
willingly fund. There is also the very real possibility that generation rates would increase
all electric customers in this area of the county. At a time when up county citizens are
already affected by decreasing property values, job loss, reductions in force, furloughs
and increased property taxes, this is just adding insult to injUry.
to
Serving Our Community Since 1946
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For a county in deep financial trouble that is trying to encourage businesses to locate to
this area, a bill such as this is also counter-productive and sets a bad precedent. What
company wants to do business in a location where it could be easily singled out this way?
We at the UMCVFD are concerned not only about the effect this bill would have on our
first due area, but on the County's long range ability to attract private businesses.
Enacting this bill would negatively impact future growth potential and job creation for
the entire county. Please do not pass EB29-10.
Respectfully Submitted,
Ross
L.
Meern, President
UMCVFD
@
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Bill 29-10
Amendments 1-3
By Councilmember Berliner
1) Insert on ©3, after line 38, and renumber later sections:
52-97. Credit.
W
!hl
The Director must allow a credit against any tax due in an amount that reflects the
proportionate reduction in emissions of carbon dioxide from any source in the
County funded by any County greenhouse gas reduction program. compared to
the amount of carbon dioxide emitted in the previous calendar year iJy eachmaior
emitter of carbon dioxide.
The Executive by regulation must further define which reductions in emissions
are considered in calculating this credit and how those reductions are
me~
2) Insert on ©2, at the end ofline 38:
These regulations must identifY the source of verifiable and measurable emissions data. which
must be
a
federal or. state air pollution control agency. on whi<;h the Director must base the
amount of tax due.
3) Insert at end of ©4:
Sec. 3. Revenue Allocation Suspended.
Notwithstanding County Code Section 52-99. as enacted by Section 1 of this.1\ct, the
revenue received from the tax levied under County Code Section 52-96 in the first full fiscal vear
the tax collected must be. held in aspecial reserve account.
F:\LAW\BILLS\1029 Carbon Tax\Berliner Amendments.Doc