TMEPA Legislative Update - Legislative Traffic Jam

Legislative sessions never have a definitive end date, but there are certain parts of the process that are benchmarks that signal when the end might be near. The governor files his budget every year in late January or early February, but he fine tunes it with a final amendment to the budget that takes into account the latest revenue projections. The filing of this amendment, which is one of the signals that the end of session is near, is waiting on something else: passage of the transportation funding legislation. The proposed legislation changes not only transportation taxes, it also cuts other taxes whose revenues go into the general fund. The transportation funding bill is scheduled to be heard by the full House and Senate Wednesday, April 19. Once the transportation funding bill passes and the governor’s administration knows what taxes will be cut or raised, it can file the governor’s budget amendment. After the amendment is filed and legislators file their amendments to the budget, the legislature will still need a one or two to work through the budget and all of the bills that are waiting on funding to be included in the budget before they can go forward. Therefore, it looks like the legislature may not adjourn until the first or second week in May. In the meantime, there are still several bills affecting municipal electric systems still hanging around to keep us busy.


TMEPA’s municipal energy authority legislation (HB1290) passed the full Senate Thursday. The bill expands current law so that every municipal electric system (except the big four systems) would only have to have their city council approve it by a two-thirds majority without having to then also get state legislative approval. Because some municipal electric systems offer other utility services, the bill includes language regarding water and wastewater service. Removed from the original bill was all of the gas provisions in the bill due to opposition from private gas companies and gas utility districts. The result is a municipal electric system that offers gas service could not become an energy authority under this bill, but they would still be able to become one through a private act. The House version ran into a procedural issue last week and will have go through the House Finance Subcommittee and full House Finance Committee, with consideration by the full House a couple weeks away.


The governor’s broadband bill was approved by the full House last week, which followed the full Senate approving it a week ago. The highest profile part of the bill allows electric cooperatives to offer broadband and video services. Also included in the bill are grants ($35 million over three years) to expand 10/1 internet service to unserved areas and a tax incentive ($10 million over three years) for private companies that purchase broadband equipment. Another bill now in the Senate and House Finance Committees would benefit private broadband providers. SB1363 as amended changes the classification of property of ILECs, CLECs and telephone cooperatives so their property is assessed lower at a rate similar to cable companies. The state constitution provides for categories of real property, with public utility property assessed at 55 percent of its value and industrial and commercial property assessed at 40 percent of its value. Currently, the legacy telephone companies like AT&T and telephone cooperatives are classified as a public utility and are assessed at 55 percent of its value, while cable companies like Comcast and Charter are classified as industrial and commercial property and are assessed at 40 percent of its value. All of these companies now provide internet service but are taxed at different rates, and this bill taxes them at a similarly assessed value. For municipal broadband providers and soon to be electric cooperative providers, their telecommunications services will also be classified as industrial and commercial property and will therefore see lower PILOTs and property tax payments. This property reclassification will result in about an annual $15 million property tax cut, a hit to property tax revenues of local governments who will be held harmless with payments from the state. In total grants and tax cuts in the two bills, around $35 million in state tax money annually will go to mostly private broadband providers with the goal to expand service. Legislation to expand municipal broadband, which is paid for by municipal broadband ratepayers without any taxpayer subsidies, is not expected to pass this year.


All bills that would require municipal utility boards to add members are dead for the year. HB269 was pulled early in the legislative session, with the bill sponsor asking the Comptroller and utility associations to study the issue of board representation. Two weeks ago, SB1247 was pulled after the House sponsor from Shelby County received written assurances from Memphis city leadership regarding input into the MLGW board from outside Memphis city limits. Even though both bills are dead for the year, previous legislative sessions have seen similar bills, so this issue is likely to return in the future.


Under legislation (SB1336, amendment to the bill) waiting for full House and Senate approval, a moratorium on any new wind farms would be put in place until July 2018 while a six member special joint legislative study committee. The study committee would be tasked with coming up with recommendations by January 2018 regarding the siting of wind energy facilities. The moratorium would not apply to jurisdictions where local governments have already adopted siting of wind energy facility regulations within its jurisdiction. The legislation is in response to a proposed wind farm project in Cumberland County is being considered. The bill is waiting to be scheduled in the full Senate, while in the House it is calendared to be vote on House floor on Thursday, April 20.

The governor has signed legislation to require water and wastewater boards to undergo training and continuing education. SB138 requires board members of any utility that offers water or wastewater service to undergo 12 hours of training on subjects like board governance, financial oversight, policy-making responsibilities, and other topics related to duties of the board. An amendment on the bill clarifies the training requirements also apply to city councils that serve as a utility’s board. This legislation does not apply to boards that oversee only an electric utility.


This year saw Piedmont Gas push legislation aimed at Nashville Electric Service. The bill (HB983 as amended) would have forced NES to change their connection fees, specifically regarding whether the property has just electric service or both electric and gas service. NES’s connection charge fees recover their costs, but Piedmont Gas testified they believe the fees are unfair. The bill had advanced out of a House subcommittee and out of the Senate State and Local Government Committee. The utilities entered into discussions while the bill was in committees for a few weeks, and which resulted in the utilities working out an agreement just before a House committee meeting when the bill was pulled.


HB438 would create an energy policy council within state government that would make recommendations on the state’s energy policy. The bill’s sponsor Rep. John Ragan has been pushing this bill for several years. The bill has advanced in both the House and Senate this year, but it still has to get through the Finance Committee is both chambers. This is where the bill and its $233,000 fiscal note usually stall out.


A bill recommended by the Comptroller regarding taking corrective actions from audit findings is finally moving. As amended, SB315 requires local governments and utilities with one or more audit findings to submit a corrective action plan to the Comptroller addressing each finding. The corrective action plan must provide contact names for who is responsible for the corrective action, the corrective action taken or planned, and the anticipated completion date. If the local government or utility does not agree with an audit finding, or believes corrective action is not required, the corrective action plan must state the reasons and justifications for that disagreement or belief. The amendment language which rewrites the bill can be found here. The bill originally allowed the state to withhold tax revenue in reserve until the noncompliant local government becomes compliant with the bill, but that has been taken out of the bill. The Senate State and Local Government Committee approved the bill last week, and it’s next headed to the Senate floor. On the House side, it was approved by the House Local Government Subcommittee and is calendared for the full committee this week.


Legislation (HB1167) was advanced last week in the House and Senate to change the valuation standard when obtaining property through eminent domain. As amended in the House, the House bill requires some properties taken under eminent domain to be valued according to its highest and best use instead of the current standard of fair market value. This could cause significant increases in costs to obtain property. However, it appears municipal electric systems are not affected by the bill and would not see a change in the way they valuate property. Property obtained under eminent domain by municipal electric systems would still be valued at fair market value. The bill was approved by the Senate Judiciary Committee and heads to the Senate Finance Committee, and on the House side moves to the full House Finance Committee after being approved by the House Finance Subcommittee.


A bill to protect vendor information related to cybersecurity has been signed by the governor. SB1201 authorizes local governments to make the identity of a vendor that provides goods or services used to protect electronic information process systems, telecommunication and other communication system and data storage confidential by affirmative vote of its governing body. The bill also requires the identity of a state vendor that provides goods or services used to protect electronic information process systems, telecommunication and other communication system and data storage for the state to be confidential.


State law on open records requests would see some tweaking if SB464 passes with a proposed amendment. The bill clarifies that requests to simply view records do not have to be in writing and cannot be assessed a fee. To request copies of public records, a government entity may require it be in writing, and if it is required to be in writing the written request shall be accepted if delivered in person, by mail, by email, or by an electronic form. A government entity may still require the requestor to present a photo ID. Additionally under the bill as amended, if a person makes two or more requests to view a public record within a six-month period and, for each request, the person fails to view the public record within fifteen business days of receiving notification the record is available to view, the local government is not required to comply with any public records request from the person for a period of six months from the date of the second request unless the records custodian determines failure to view the public record was for good cause. Also under the bill, if a person makes a request for copies of a public record and, after copies have been produced, the person fails to pay to the records custodian the cost for producing such copies, the records custodian is not required to comply with any public records request from the person until the person pays the local government for such copies if the records custodian provided the person with an estimated cost for producing the copies in prior to producing the copies and the person agreed to pay the estimated cost for such copies. The bill has been approved by the full House and Senate in slightly different versions, with the House set to approve the Senate version this week.


Legislation to expand the ability for communities to de-annex from municipalities has moved out of the Senate State and Local Government Committee, but it’s up in the air whether it will get pushed this year. SB641 would allow residents in an area to hold a referendum to vote on whether to leave the city. Included in the bill is clarification the discontinuation of utility services outside municipal boundaries would not be needed for reasons related to de-annexation. Also in the legislation is language that clarifies any deannexation would not affect current utility services, meaning utility service would not have to be pulled out of deannexed areas. This issue saw heavy debate last year, and a bill even based both the House and Senate in different forms. This year’s bill hasn’t been calendared in the House Local Subcommittee, which is closed for the year.

• SB1158 establishes an Emergency Relief Program, to be administered by TEMA under which a city or county may request a grant to help offset the costs incurred by the county in responding to an emergency. Money would still need to be appropriate to the program in the budget. The bill is to House and Senate Finance Committees.

• SB794 was deferred to a summer study in the House and removed from consideration for the year in the Senate. The bill would allow communities in start a Property Assessed Clean Energy (PACE) program. Under the program, cities would allow property owners to borrow money from the city to install solar or other "clean energy" devices on their homes, and the property owners would pay back the costs of the devices through a special assessment on their property taxes.