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Concern voiced about loss of property tax base

HELENA - Based on their initial research, officials in Helena have found no legal reason why Butte-Silver Bow County and other local governments couldn't bid to buy Montana Power Co.'s energy businesses, but there was concern about the loss of property tax base.

"I am not familiar with any reason why they couldn't," said Public Service Commissioner Bob Rowe, D-Missoula. "I suppose the argument is whether it exceeds the authority in the law."

Attorney Rowe, however, was interviewed by cell phone returning from Missoula and said he didn't have his law books with him.

But Mick Robinson, chief of staff to Gov. Marc Racicot, said if local governments buy the Montana Power Co., there will be a significant loss of state property tax revenues.

A number of other cities besides Butte are interested in exploring the possibility of trying to buy Montana Power's electric transmission lines, natural gas pipelines and its coal, oil and natural gas commodity businesses, according to Alec Hansen, executive director of the Montana League of Cities and Towns.

"We're looking at it right now," Hansen said. "There are a lot of people who are interested in some kind of a public ownership arrangements."

Montana Power announced March 28 it was putting all of its businesses up for sale and focusing exclusively on its booming telecommunications business, Touch America.

If some cities were able to buy Montana Power, it would have two main advantages, said Hansen. First, he said, a well-managed publicly owned utility would help keep the lid on utility rates. Second, he said, the big advantage of a public power business is that it would qualify to buy cheaper preference power from the Bonneville Power Administration.

"This is going to become critically important as the market is deregulated," Hansen said.

The league, he said, is having legal research done to determine if the cities could buy the MPC properties under existing law and, if not, whether the law should be changed at the upcoming special session that begins May 8.

"It may be now or never," Hansen said.

While keeping low rates is a reason to buy Montana Power, Hansen said a municipally owned electric and natural gas utility would be interested in maintaining the kind of service provided by Montana Power.

"That company was built on service," he said.

Top Racicot aide Robinson said the administration has not really looked into the possibility of local governments buying Montana Power's properties, although Jack Lynch, Butte-Silver Bow chief executive, talked to the governor about it earlier in the week, he said.

Racicot has not decided yet whether to include Montana Power as one of the issues on his formal call for the special session, Robinson said. If it's not on the call, legislators can vote to expand the session to include it if 76 of the 150 lawmakers concur.

"We have talked to a lot of people, and there are still a lot of opinions on the legal authority," he said.

He said the Montana Power issue becomes a very complex issue that he is not sure that a short special session could address.

"The only thing that came to my mind is: What about the tax impact?" Robinson said. "If it goes to local government, it's a significant drop in property tax revenue."

Robinson, a former state revenue director, said he has wondered what might happen to the property tax base if cities buy the rest of Montana Power, because municipalities don't pay taxes. And if rural electric cooperatives, which intend to bid on MPC, were to buy it, property taxes would drop because they pay at a lower tax rate than do utilities.

Property taxes for utilities were revised extensively by the 1999 Legislature, so comparisons may be difficult. However, all utilities, including Montana Power, paid $144.24 million in tax year 1997 (fiscal year 1998) for 19.8 percent of the $748.36 million paid in property taxes by all classes of property, according to the Revenue Department's 1999 Guide to Taxes.

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