HB 1277 (Busatta Cabrera), which substantially impacts municipal utilities and enterprise fund transfers, will be heard by the House Energy, Communications and Cybersecurity Subcommittee on Friday, January 19, at 12:30 p.m.
The bill does the following:
- Prevents municipalities from realizing a reasonable rate of return on their utilities by capping transfers of utility revenues to fund general government services.
- Establishes a fluctuating cap on transfers based on an average rate of return approved by the PSC for investor-owned utilities.
- Cuts statutorily authorized surcharges on extraterritorial customers in half, starting in July 2025.
- Will harm small and fiscally constrained municipalities where a utility helps offset a weak property tax base.
It’s unreasonable to further reduce the transfer rate if the utility is serving extraterritorial customers.
- These reductions reduce the rate of return for municipal utilities far below that which is allowed for investor-owned utilities.
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Extraterritorial customers benefit from services that are funded by utility revenue transfers, including municipal parks, public transportation and transit, aquatic facilities, ball fields and recreation programs, and municipal roads.
- With few exceptions, municipal utilities ensure that revenues are prudently invested BEFORE considering any transfers to the general fund.
While some reduction in the currently authorized surcharges may be appropriate, a longer transition period would mitigate impacts to bond obligations, interlocal agreements, and planned capital projects that rely on current revenue streams.
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