TAXES SAFE FROM DEREGULATION

Missouri hasn't plugged into electric utility deregulation yet.

But state lawmakers already have taken steps to protect cities' tax revenues should the system of utility monopolies be scrapped in favor of retail electric competition.

Lawmakers passed a bill on the last day of the legislative session this month that would allow cities to collect gross receipts taxes from all utilities that sell gas or electric power in their communities.

Municipal governments feared losing franchise-tax revenue in a deregulated market.

Franchise taxes are generated through gross receipts taxes that are levied upon the utility company serving customers in an area. Those taxes, in turn, are passed on to the consumer in the form of higher bills.

But under retail competition, consumers might receive their power from other utility companies, reducing revenue for the franchised utility and tax money for the local government.

Sen. Wayne Goode's bill attempts to plug that hole. Even if Gov. Mel Carnahan signs the bill into law, Goode doesn't know if the legislation would withstand a court challenge.

A number of legal issues come into play, including whether you can tax an out-of-state company that sells power in the state and how the measure might be impacted by the tax limitations of the state's Hancock Amendment.

"I would think there would be a court challenge," said the St. Louis area Democrat.

Even if the legislation stands, it won't kick in for most local governments unless the state allows electric competition at the retail level.

Bill Johnson, deputy director of the Missouri Municipal League, said the legislation won't kick in for most local governments unless or until the state allows retail electric competition.

The bill includes a provision that would allow cities, with voter approval, to impose a consumption tax on consumers.

Johnson said that provision offers another tax option for cities in the event that courts bar them from levying a gross receipts tax on all utility companies selling power to customers in their communities.

Johnson said the bill was one of the legislative priorities of the Missouri Municipal League this year.

He said the possible future loss of franchise tax revenue was a real concern to local governments.

A League survey last summer found that franchise taxes on utilities amounted to between 17 and 27 percent of total revenue for many Missouri cities.

John Richbourg, Cape Girardeau's finance director, said the franchise tax on electric power sold in the city by AmerenUE generates more than $2 million a year.

AmerenUE also sells natural gas in Cape Girardeau. That brings in another $482,000 a year in franchise tax revenue for the city.

Franchise taxes on cable television and telephone operations bring in more than $230,000 a year, Richbourg said.

In all, franchise taxes generate about 13 percent of the revenue that goes into the city's general fund.

"It is our second biggest source next to the sales tax," Richbourg said. "It is a significant part of our income."

Goode's bill could help keep it that way. Said Richbourg, "It is definitely a bill we wanted passed."