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Governor's proposal would nix exemption for city-owned utilities

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Jacksonville Water Plant

Chris Patterson, with the Jacksonville Water Treatment Plant, talks about problems with the water digester. Photo by Trent Penny/The Anniston Star

Among Gov. Robert Bentley’s proposals for new tax revenue is a suggestion that could increase utility bills for more than 1 million Alabamians.

The governor’s plan, presented last week as part of a package to address a $700-million-plus budget deficit, included a provision to remove a tax exemption for city-operated water, gas and power companies. Before that can happen, however, the plan, which would apply a 2.2 percent tax to city utility companies, would have to be approved by both houses of the Legislature.

Representatives of city utility companies said that if the Legislature approves the change, the added expense is likely to be passed on to customers.

“Any tax on a public utility will result in increased electric rates for all customers,” John Hand, executive director of Electric Cities of Alabama, an organization that represents the state’s municipal electric authorities, said Monday.

Hand declined this week to provide further comment until he was able to read the governor's plan.

The tax in question is the Public Utilities License Tax. It is paid by utility companies such as Alabama Power and Alagasco, and is used to support the state’s General Fund and the Department of Mental Health. Companies pass the cost on to their customers, officials said.

The state exempts some utilities from paying the tax, including electric, gas and water companies operated by cities, and countywide water systems.

As a result, state residents served by city utilities are spared the 2.2 percent pass-through expense on their bills. Municipal utilities already pay a 4 percent tax on their gross receipts, as commercial utilities do.

The governor's plan would end the license tax exemption for municipal utilities. It’s not clear whether that would include county water authorities.

Attempts to reach the governor’s office for comment this week have been unsuccessful.

The news of a potential tax increase came as one local utility, the Anniston Water Works and Sewer Board, announced rate increases.

At the same time, the Jacksonville’s Water Works, Gas and Sewer Board is contemplating a rate increase to pay for needed water treatment plant repairs.

The new tax would likely add to both the increases in Anniston, and to any sewer rate increase in Jacksonville.

“We have no choice as a public utility,” said Rodney Owens, assistant general manager of the Anniston Water Works and Sewer Board.

Staff writer Laura Gaddy: 256-235-3544. On Twitter @LGaddy_Star.