Agenda Item 6
February 4,2014
Action
MEMORANDUM
TO:
FROM:
SUBJECT:
County Council
~ichael
Faden, Senior Legislative Attorney
Action:
Expedited Bill 35-13, Taxation - Fuel-Energy Tax - Timing of Payments
·
The joint Government Operations and Fiscal Policyffransportation, Infrastructure,
i
Energy and Environment Committee recommendation:
enact the Bill with amendments.
Expedited Bill 35-13, Taxation - Fuel-Energy Tax Timing of Payments, sponsored by
the Council President at the request of the County Executive, was introduced on December 10,
2013.
Bill 35-13 would amend the timing for payment to the County of the fuel energy tax, as
recently recommended by the State Public Service Commission, to allow payment by the last day of
the next month rather than the 15
th
day. This two-week delay in the payment would permit a public
utility to avoid advancing cash from their own working capital to pay the energy tax before they
received payment for it from their customers. Currently, the cost to the utility to advance the cash
has been passed onto the utility's customers.
Public Hearing
The lone speaker at the January 28 public hearing, Jerry Pasternak, PEPCO, supported the
Bill.
©
10-11. Finance Director Joseph Beach also supported the Bill on behalf of the Executive in
written testimony at
©
12.
.
GOff&E Worksession
A joint Government Operations and Fiscal Policy/Transportation, Infrastructure, Energy
and Environment Committee worksession was held on January 23, at which the Committee
tentatively recommended enactment of the Bill pending any issues raised at this hearing.
This packet contains:
Expedited Bill 35-13
Legislative Request Report
Memo from County Executive
Fiscal and economic impact statement
Testimony of Jerry Pasternak, PEPCO
Testimony of Finance Director Joseph Beach
F:ILAWIBILLSI 1335 Taxation - Fuel-Energy Tax ­ Timing Of PaymentslAction Memo.Doc
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Expedited Bill No.
35-13
Concerning: Taxation - Fuel-Energy Tax
- Timing of Payments
Revised: 1-29-14
Draft No. 4
Introduced:
December 10, 2013
Expires:
June 10, 2015
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: -'--'-N-"'-'on..!.!:e::...-_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request ofthe County Executive
AN EXPEDITED ACT
to:
amend the timing for payment of the fuel energy tax;
ill
update archaic language and make stylistic and corrective changes; and
[(2))
ill
generally amend County law regarding the fuel energy
tax
(1)
By amending
Montgomery County Code
Chapter 52, Taxation
Section 52-14
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface bracketsD
* * *
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. 35-13
1
Sec
1.
Section 52-14 is amended as follows:
52-14.
Fuel-Energy Tax.
2
3
4
5
6
*
(b)
*
*
III
Person as used [[herein shall mean]]
this Section means any
individual or legal entity, and includes any corporation, company,
association, firm, [[co-partnership]] partnership, [[or any]] group of
individuals acting as a unit, [[and includes any]] trustee, receiver,
assignee", or personal representative [[thereot]]. Director in this Section
means the Director of Finance.
(c)
Every person who transmits, distributes, manufactures, produces, or
supplies fuel or energy in the County must pay the tax and report any
information required by the Director [[of Finance]] for each calendar
month on or before the [fifteenth] last day of the following month. With
the written permission of the Director [of Finance], a person who
regularly owes taxes under this Section may pay the tax and make
reports on a quarterly basis, on or before the [fifteenth] 15
th
day of
April, July, October, and January in each year for the preceding 3
months.
[[*
7
8
9
10
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14
15
16
17
18
19
20
21
*
*]]
(d)
If any person [[shall fail or refuse to]] does not [[remit]]
IlliY
the tax due
[[required to be paid]] [[hereunder]] under this Section or [[to make]]
file a proper return to the Director [[of finance within]]
~
22
23
the time and
in the amount [[specified]] required [[herein]], [[he shall be]] that
person is liable for interest on the amount of
tax
due at the rate of [[one­
halt]]
'lS
of one
[[(1)]]
percent per month on the amount of the tax for
each month or [[portion thereof from the date upon which]] part of a
month after the tax is due [[as provided herein]], and [[shall also be
@f:\laW\biIlS\1335 taxation - fuel-energy tax - timing of payments\ 1335 bill4.doc
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EXPEDITED BILL
No. 35-13
28
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35
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39
liable for]] a penalty of [[ten (10)]] 10 percent of the amount of the
tax~
[[, and such]]
a part of the tax.
(e)
If any person [[shall fail or refuse to make]] does not timely file any
report and [[remittance]] pay the tax required [[herein, within the time
provided herein]] under this Section, the Director [[of finance shall
proceed in such manner as he]] may [[deem necessary to]] [[obtain]]
any [[facts and]]
information [[on which]] to [[base his]]
interest and penalty [[shall]] due may be collected as
estimate [[of]] the tax due. As soon as the Director [[of finance shall
procure such facts and]] obtains available information [[as he is able to
obtain upon]] on which to base the [[assessment]] calculation of any tax
payable by any person who has [[failed or refused to make such]]
timely filed any report and [[remittance]] paid the tax, [[he shall proceed
to determine and]] the Director may assess against [[such]]
[[the]] any
and penalties [[provided for herein]]
person
and
mail
[[of the total
total
40
41
42
43
44
[[shall]] must notify such person of the total amount due by
sent to [[his]]
last known [[place of]]
address~
45
46
amount of]] [[such]] [[tax, interest", and penalties, and the]]
amount [[thereof shall be payable]] assessed is due and payable within
[[ten (10)]] 10 days [[from]] <:!fter the [[date of such]] notice
~~.
47
48
49
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(f)
[[It shall be the duty of every]] Every person liable for [[the payment to
the county of]] any tax [[imposed herein to keep and]]
Section must preserve, for [[a period of two (2)]]
~
_~==~
years, [[such
suitable]] any records [[as may be]] necessary to [[determine]]
~~~
the amount of [[such]] tax [[as he may have been liable for the county,
which records the director of finance shall have the right to]]
~~~;,g
the Director may inspect at [[all]] any reasonable [[times]]
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EXPEDITED BILL NO.
35-13
55
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(g)
[[Whenever]] If any person required to pay [[to the county]] a tax
[[hereunder shall cease]]
othelWise [[dispose of his]]
business, any tax payable [[hereunder to the county shall become]]
under this Section is immediately due Hand
person [[shall]] must immediately [[make]]
due.
payable]]~
doing business or
and [[such]] the
60
61
a report and pay any tax
62
(h)
The Director [[of Finance]] may [[issue regulations]] adopt a regulation,
by Method 2, to assess, collect, audit, and othelWise administer the tax
imposed by this Section.
If the Council by resolution establishes
63
64
65
different rates for different categories of fuel-energy use, the regulations
may specifY how the Director will determine whether a taxpayer
qualifies under the resolution for any rate that is less than the maximum
rate.
(i)
66
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Any [[person violating or failing to comply with any of the provisions]]
violation of this Section [[shall be subject to punishment for)) is a class
A violation [[as set forth in section 1-19 of chapter 1 of the County
Code]].
Each violation [[shall constitute]]
a separate offense.
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73
[[Such]] Any conviction [[shall]]
not relieve any [[such]] person
~~~~
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from [[the payment, or remittance of such]]
tax
Sec. 2.
Expedited Effective Date.
The Council declares that this legislation is necessary for the immediate
protection of the public interest.
becomes law.
This Act takes effect on the date on which it
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LEGISLATIVE REQUEST REPORT
Expedited Bill 35-13
Fuel-Energy Tax
-
Payment Timing
Taxation
DESCRIPTION:
This Bill would amend County law to allow Fuel Energy Tax payers to remit
tax payments until the last day of the following month, instead of the 15
th
day
of the following month.
The current payment schedule does not give enough time for Utilities and
other individuals and entities that pay the County's Fuel Energy Tax to collect
the funds without having to increase their working capital requirements,
which in tum adversely impacts rates that customers pay.
To adjust payment timing requirements so that any financial hardship is
mitigated.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
Department of Finance
FISCAL IMPACT:
None
ECONOMIC
IMPACT:
EVALUATION:
None
Subject to the general oversight of the County Executive and the County
Council.
Unknown.
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
Michael
J.
Coveyou, Chief, Division of Treasury, Department of Finance
None.
APPLICATION
WITHIN
MUNICIPALITIES:
PENAL TIES:
None.
F:\LAW\BI LLS\ 1335 Taxation - Fuel-Energy Tax - Timing Of Payments\Legislative Request Report.Doc
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OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 20850
Isiah Leggett
County Executive
MEMORANDUM
December 4, 2013
TO:
FROM:
SUBJECT:
Craig Rice, Council President
Isiah Leggett. County Executive
Expedited Bill xx-13: Taxation - Fuel·EnergyTax
Timing of Payments
I am transmitting to Council for introduction an expedited bill that moves the date
for payment of the fuel energy tax from the fifteenth day of each month to the last day of each
month with the LRR and Fiscal and Economic Impact statements. The current payment schedule
does not give enough time for Utilities and other individuals and entities that pay the County's
Fuel Energy Tax to collect the funds without having to increase their working capital
requirements, which in turn adversely impacts rates that customers pay. This recommended
amendment resolves that issue.
I would appreciate your consideration of this bill at your earliest convenience. If
you have any questions or require additional information, please do not hesitate to contact Joseph
Beach, Director, Department of Finance, at 240-777 ·8870.
Attachments
c:
Joseph F. Beach, Director, Department of Finance
montgomerycountymd.gov/311
~.J
240-773-3556
TTY
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Fiscal Impact Statement
Bill
XX~XX,
Taxation - Fuel-Energy Tax - Timing of Payments
1.
Legislative Summary.
This Bill will allow all taxpayers who pay fuel-energy tax to submit payments and any
required information to the Director ofFinance by the last day ofthe following calendar
month. Current law allows taxpayers to remit payments and information by the fifteenth
day ofthe following month.
2. An estimate of changes in County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in the recommended or approved budget. Includes
source of information, assumptions, and methodologies used.
The Bill does not change the rate ofthe fuel-energy tax, only the timing ofpayments.
There will be no effect on revenues or expenditures. Per the Department ofFinance, no
additional staff time or County resources are requiredfor implementation ofthis Bill.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
N/A
4. An actuarial analysis through the entire amortization period for each bill that would affect
retiree pension or group insurance costs.
N/A
5. Later actions that may affect future revenue and expenditures if the bill authorizes future
spending.
N/A
6. An estimate of the staff time needed to implement the bill.
Per the Department ofFinance, no additional stafftime or County resources are required
for implementation ofthis Bill.
7. An explanation of how the addition of new staff responsibilities would affect other duties.
Per {he Department ofFinance. no additional staff time or County resources are required
for implementation ofthis Bill.
8. An estimate of costs when an additional appropriation is needed.
N/A
9. A description of any variable that could affect revenue and cost estimates.
The bill does not change the rate ofthe fuel-energy tax, only the timing ofpayments.
There will be no effect on revenues or expenditures.
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
N/A
11.
If
a bill is likely to have no fiscal impact, why that is the case.
(j)
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The Bill does not change the rate ofthe fuel-energy tax, only the timing ofpayments.
There
will
be no effect on revenues or expenditures. Per the Department ofFinance, no
additional stajJtime or County resources are requiredfor implementation ofthis Bill.
12. Other fiscal impacts or comments.
N/A
13. The following contributed to and concurred with this analysis:
Jedediah Millard - Office of Management and Budget
Naeem Mia - Office of Management and Budget
Michael Coveyou - Department of Finance
Date
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Economic Impact Statement
Bill
#-#,
Taxation - Fuel-Energy Tax - Timing of Payments
Background:
This legislation would amend the timing for payment of the
tax.
and generally amend
County law regarding the fuel energy
tax.
The Bill amends current law by changing the
date on which persons or companies; who transmit, distribute, manufacture, produce, or
supply fuel of energy to the County; may now remit tax payments on the last day of the
following month in which such collections are received by the persons or companies
from fuel and energy customers.
1. The sources of information, assumptions, and methodologies used.
Not applicable
2. A description of any variable that could affect the economic impact estimates.
Not applicable
3. The Bill's positive or negative effect, if any on employment, spending, saving,
investment, incomes, and property values in the County.
This bill amends the timing of when fuel-energy tax payments are remitted to the
County. Therefore, the Bill has no economic impact.
4. If a Bill is likely to have no economic impact, why is that the case?
This bill only amends the timing ofpayments ofthe fuel and energy tax collected by
persons or companies and sent to the County.
5. The following contributed to and concurred witb tbis analysis: David Platt and
Michael Coveyou, Finance.
{Z-/
'//,
J
Date'
I
Page 1 ofl
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~pepco
A PHI Company
Jerry Pasternak
Vice President Pepco Region - Maryland
7
Maryland Affairs
701 Ninth Street, NW
Washington, DC 20068
202-872-2524 Phone
January 28,2014
Montgomery County Council
100 Maryland Avenue
Rockville, Maryland 20850
Re: Expedited Bill 35-13
Dear Council President Rice and Councilmembers:
The Potomac Electric Power Company ("Pepco") submits these comments in support of
Expedited Bill 35-13, Taxation - Fuel-Energy Tax - Timing of Payments.
Current law provides for remittance of the fuel-energy tax either on a quarterly payment
schedule, if authorized by the County, or on or before the fifteenth day of the following
month.
Prior to January 2103, Pepco was authorized to pay on a quarterly basis. Effective with
the January 2013 reporting period, however, the County notified Pepco that payments of
the monthly tax would be required on or before the fifteenth day of the following month.
Expedited Bill 35-13 would amend the timing for payment to the County of the fuel­
en~rgy
tax to allow payment for a month by the last day of the following month, rather
than by the fifteenth day of the following month. The bill changes not the
rate
of the
fuel-energy tax but rather the
timing
of payments.
The proposed change is the result of discussions between Pepco and Montgomery County
that took place at the urging of the Maryland Public Service Commission (the "PSC").
In
Order No. 85724, issued on July 12,2013, the PSC noted that the change from
quarterly to monthly payments increased costs to consumers because it increased Pepco's
cash working capital (CWC) requirement. CWC is the cash a utility needs to cover its
operating expenses to provide service until the revenues from that service are collected.
In
the case of the fuel-energy tax, Pepco is currently collecting the revenue for the tax in
approximately 48 days through the utility bill, but it must pay the tax to the County every
30 days. This lag creates a need for additional CWC for 18 days and has an impact of
approximately $14.5 million on our rate base, which in turn has a direct impact on raising
the utility bills of all customers.
Expedited Bill 35-13 allows an additional two weeks to remit the
tax
to the County and
substantially alleviates the negative impact caused by the current monthly payment
schedule.
@
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Montgomery County Council
January 28,2014
Page 2
Pepco thanks the County Executive and the Department of Finance for working
collaboratively with us to address this issue, and we urge prompt enactment of the bill by
the County Council.
Sincerely,
~~emak
cc:
~~~
Honorable Isiah Leggett
Mr. Joseph F. Beach
Ms. Bonnie Kirkland
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Testimony: Council
Bill 35-13
Taxation -Fuel-Energy Tax -Timing
of Payments
Good afternoon, my name is Joseph Beach, Director of the County Department of
Finance and I am here on behalf of County Executive Isiah Leggett to testify in support of
Council Bill 35-13, Fuel Energy Tax - Timing of Payments.
This legislation delays by two weeks (from the middle to the end ofthe month) the time
in which any payer ofthe County's fuel energy tax must submit its tax payment to the Director
of Finance. As you can tell from the legislation there is an option, with the permission ofthe
Finance Director, to pay the fuel energy tax on a monthly or quarterly basis. For several years,
the Finance Department pennitted any entity that was responsible for paying the energy tax to
pay on a quarterly basis.
In
order to improve liquidity and promote consistency in collection and
forecasting of the energy tax revenues, in early 2013, the Finance Department required all payers
to submit payment on a monthly basis.
Certain payers, especially utilities, indicated that this was a hardship for them financially
because they argued that it required them to advance cash from their own working capital to pay
the energy tax before they received it from their customers.
In
fact, PEP CO had raised this as an
issue to the Public Service Commission during its last request for a rate increase. The PSC
recommended earlier this year that PEPCO and the County work to resolve this issue. To avoid
passing these additional costs on to ratepayers on this basis and yet maintain a favorable
collection schedule for the County Government it is recommended in this legislation to advance
the monthly payment due date by two weeks to relieve any hardship on payers.
I urge you to support this legislation.
Thank
you for pennitting the time to address the
County Council on this important matter.
@