May 3, 2016 – RI Future

On January 14, 2016, the Rhode Island Supreme Court ruled that wind turbines are manufacturing equipment and therefore exempt from local property taxes under state statute. The decision in DePasquale v. Cwiek developed the legal view that wind turbines are, “used exclusively for the purpose of transforming raw material—wind—into a finished product—electricity—and as a result the taxpayer meets the definition of a manufacturer, making the turbine eligible for tax-exempt status.”

If turning wind into electricity is a tax free proposition, it logically follows that turning “natural” gas into electricity would be as well. For instance, Invenergy‘s proposed $750 million fracked gas and oil burning plant in Burrillville, may well have been a tax free proposition for the company under this ruling.

Fortunately, there is a specific statute to the contrary, R. I. Gen. Laws § 44-3-30:

44-3-30 Burrillville – Property taxation of electricity generating facilities located in the town. – Notwithstanding any other provisions of the general laws to the contrary, the town council of the town of Burrillville is authorized to determine, by ordinance or resolution, an amount of taxes to be paid each year on account of real or personal property used in connection with any facility for the generation of electricity located in the town, notwithstanding the valuation of the property or the rate of tax.

All well and good then. The Town Council of Burrillville has the absolute right to set the taxes for the proposed Invenergy plant at any level they wish “notwithstanding any other provisions of the general laws”. They could set the tax rate at $1 a year or a $100 million a year. In fact, if the Town Council were truly interested in stopping the proposed power plant, they could simply set the tax rate at $100 billion per year. It would stop the development cold.

Let me repeat: Despite the RI Supreme Court ruling, the Burrillville Town Council has absolute authority to set the tax rate for the new power plant at whatever level they wish.

Yet that is not how Town Manager Michael Wood and Burrillville Town Council solicitors Oleg Nikolyszyn and Michael McElroy seem to have reacted to the court’s ruling. Instead, the Burrillville Town Council, at a special meeting on February 23, asked Reps Cale Keable and Brian Newberry, as well as Senator Paul Fogarty, to “make sure that the existing [state level] legislation [cited above] we have will allow for the siting and construction of the new power plant in the town.”

Though it is apparent that Keable, Newberry and Fogarty didn’t make any changes to RI State Law 44-3-30 concerning power plant taxation and that no changes were necessary, that isn’t the only change the Town Council asked their state representatives to make regarding the state law around power plants. About a month earlier, at a January 27 Town Council meeting and two week after the RI Supreme Court ruling, a resolution was unanimously passed by the Burrillville Town Council to “respectfully request that our legislative delegation introduce legislation” to amend R. I. Gen. Laws § 44-3-9.3, which governs “exemption or stabilizing of taxes on qualifying property used for manufacturing or commercial purposes.”

According to the minutes of the meeting, the motion to vote on the request to change the law was made by Councillor David Place, who has announced his run for State Representative against Cale Keable.

What is the major change in the law requested by the Town Council? The addition of the word “manufacturing” over and over again within the statute, expanding the range of the statute to make sure that power plants (which could be classified as manufacturers now) are covered. Now again, changing this law is not necessary in order for Burrillville to have full control over the taxation of the proposed Invenergy plant, and the Town Council never mentions Invenergy or manufacturing when discussing this resolution prior to passage. But the timing of this requested change is suggestive.

If this request was in response to the RI Supreme Court decision, it demonstrates that the Town Council was aware of Invenergy’s plans in January, not February, as previously demonstrated. Like the February request for changes in the General Laws, this request was also ignored by Keable, Newberry and Fogarty.

Whether or not the Burrillville Town Council, Town Manager and legal counsel worried about the DePasquale v. Cwiek decision, it is apparent that they have been keen to make sure that the RI General Laws are in their favor and that the court’s decision will not apply to their town or to the Invenergy plant.

But it’s also hard to believe that the Town Council is interested in stopping the power plant’s construction. If they wanted the plant stopped, they simply have to propose a prohibitively high tax rate, one Invenergy could not afford. Cale Keable, as reported by several Burrillville residents, is correct when he says that the power to stop this plant rests with the Town Council. Sure, the Energy Facilities Siting Board has the power to approve the plant, but the Town Council has the power to make the plant so unprofitable that Invenergy will never bother building it.

In 1992, justices of the Rhode Island Supreme Court declared unanimously that prior to the Ethics Commission, “widespread breaches of trust, cronyism, impropriety, and other violations of ethical standards decimated the public’s trust in government.” The 1986 Constitutional Convention passed an extraordinary Ethics in Government Amendment, and the people approved. This amendment called for the establishment of a strong non-partisan, independent Ethics Commission which would ensure that all elected and appointed public officials would “adhere to the highest ethical standards; respect the public trust; not use their position for private gain or advantage” and, in general, serve the greatest good.

Like having a new sheriff in town, the “Wild West” of unethical behavior diminished when the Ethics Commission began to patrol the halls of government. While no oversight mechanism is ever perfect, the Ethics Commission proved to be an effective watchdog for elected and appointed public officials over many years. However, a 2009 Supreme Court ruling involving former Senate President William V. Irons, struck a severe blow to the Ethics Commission’s oversight authority over the General Assembly. This decision effectively exempted state lawmakers from scrutiny and prosecution by the state Ethics Commission for violations relating to their core legislative acts such as voting, sponsoring bills and introducing legislation. Currently, any member of the General Assembly may pursue legislation for which he or she has a substantial conflict of interest without fear of being held accountable by the Ethics Commission. This “legislators’ loophole” must be closed.

Since 2010, every attempt to close this “legislators’ loophole” died in either the Senate or House. At the start of this session, it appeared that, once again, that the ethics amendment (ethics reform) was, to borrow an expression from former Senate President Irons, “Not going nowhere!”

But, public opinion and individual voices have helped breathe new life into the ethics reform effort this session.

Both Speaker Nicholas Mattiello and Senate President Teresa Paiva-Weed deserve credit for agreeing to address this important issue this year. However, their commitment has not occurred in a political vacuum. They recognize that the upcoming election appears to be seething with anti-establishment or anti-incumbent sentiment. Angry voters are seeking positive change from their government. Failure to place a credible ethics amendment on the November ballot could hurt the re-election chances of members of the Senate and House team. Moreover, the Speaker and President undoubtedly know that a growing number of their House and Senate members support ethics reform, and wish to see the “legislators’ loophole” closed. As long as ethics reform remains in the public eye, the imperative to pass an ethics amendment will not dissipate.

Even now, there is no guarantee that the General Assembly will pass a credible ethics amendment and send it to the voters for ratification in the fall. There remain two formidable pitfalls. First, the House and Senate fail to agree on a specific ethics bill text (language), which would mean the death of ethics reform again this year. Second, Legislative leaders agree to an identical ethics amendment text that would weaken the Ethics Commission in the process. For example, if legislative leaders were to propose to eliminate the rule making ability of the Ethics Commission, only the General Assembly would be able to make or amend ethics rules going forward. Given Rhode Island’s unique history of scandal and corruption, often at the hands of the General Assembly itself, this would be unwise.

Speaker Mattiello and President Paiva-Weed stand at the threshold of passing authentic ethics reform. In this endeavor, I can only hope that they will lead wisely and serve the greatest good by restoring a measure of public trust in our state government.

Day: May 3, 2016

Burrillville Town Council has absolute authority to set Invenergy tax rates

Legislature should pass ethics reform for legislators this year