Work Session
March 8, 2010
Present were Mayor Grenier, Councilors Landry, Remillard, Danderson, McCue, Evans, and Rozek; Councilors Cayer and Poulin were absent.
Others present included Skip Sansoucy, Paul Croteau, Bill Gabler, Max Makaitis, Paul Ingersoll, Jon Edwards, Robert Pelchat, Peter Morency, Jennifer Cloutier, Randall Trull, Civics Class students, media and public
Utility Assessing - Skip Sansoucy
Mayor Grenier introduced Skip Sansoucy who has been doing the City’s manufacturing, and utility property appraisals for many years.
Skip distributed handouts of what he does for the city. He’s worked all over the United States and has an office in Lancaster and in Newington. He’s done the City’s valuations of the mill, hydros, and other utilities using an in-city land schedule based on parcel comps in a 400 mile radius since the 1990’s. He felt there were serious issues that will boil over in the next few years. The value of the City’s utilities is maintained separate from the balance of other properties.
Utility Valuation. Mr. Sansoucy explained that he is doing the value for all remaining assets of NADC. In addition to the boiler, there is a water intake structure, penstock, and water treatment plant, as well as two warehouses, scale, water system, and water pumps that are valued every year. The values on the mill property may be controversial because there are not many dismantled mills to compare to.
The City of Berlin has $109 million in utilities which is a major piece of the tax action in the city. Utilities went up in value from tax year 08 to 09. When the mill came out of bankruptcy, the hydros were split to a separate company and they are selling electricity to the Cascade mill at a reduced rate. Assessments; however are done at the market value of electricity and Great Lakes has taken issue with that. A secondary problem is that Great Lakes Hydro has about half of their power capacity going to the mills and they do not have an interconnection agreement to sell that power outside of the mill. They need to upgrade to get all 30 megawatts out, but there is some question about their place in the queue. Would they come before all others in line to get into the grid? The problem was
defined in the 1990’s and nothing has been done. It is not an acceptable condition for a reduced assessment
Mr. Sansoucy noted that PSNH went up $9 million this year and they appealed to the Board of Assessors who, by law, has to hear the case first. The reason for the big jump in value is the Renewable Energy Credits (RECs). For the city, all utility valuations are 25% of the total taxes.
Portland Natural Gas Transmission Systems went up by $3 million due to the value of steel and labor. There is a problem with TransCanada whose offices are in Alberta, Canada; they are refusing to provide information and eventually the historical data will become stale and this could exposes the city to swinging assessments. There is a bill that will come up in the Legislature that would make providing the information a requirement.
Mayor Grenier confirmed the method of assessing as replacement cost minus depreciation. When the cost to replace goes up, the value goes up.
Mr. Sansoucy reported that some people think the DRA value that applies to the utility portion of the school tax should be the values used throughout the State. There is a bill in the Legislature that is seeking to define market value for public utilities. It is dangerous activity that could result in the unit method of value being used for utilities. That would have an enormous effect on communities that have utility values as a high percentage of their total tax.
Tax Exemption Ordinance. Mr. Sansoucy went on to talk about the City’s ordinance that allows for a tax exemption for new development. Mr. MacQueen clarified that the ordinance was passed pursuant to State law that was put in to advance development in the North Country. Berlin allows tax exemptions for new construction of industrial development of 50% in first year; 40% second year; 30% in the third year, etc. The ordinance has not yet been used by any development and Berlin is the only municipality to have created an ordinance pursuant to the legislation. Skip acknowledged that it is a good ordinance to spur jobs and economic development but it has an unintended consequence in that it could be applied to energy facilities. There is no gain for the City to have this credit apply to
energy companies. New energy projects are subsidized by tax credits, production credit, and accelerated renewable energy credits (recs) are built in to the renewable energy subsidy. There are also existing pollution exemptions. Mr. Sansoucy suggested temporarily withdrawing the exemption.
Mayor Grenier made the point that if there is a five year tax exemption, the prime five years of value will be taken off the tax rolls. Skip agreed saying that sadly it is a good exemption for development but has an unintended consequence for utilities. Councilor McCue confirmed that amending the ordinance to exclude power plants would border on discrimination. He asked if the ordinance were to be withdrawn, is there a potential for the power plants to make the request for the exemption down the line. Mr. Sansoucy established that with no pending application, it would be difficult to substantiate the request.
Pollution Control Exemptions. Skip discussed pollution control exemptions that are available to energy facilities like Laidlaw and Clean Power through RSA 72:12-a. The law was put into effect in the 1970’s when companies were being forced to put in pollution control equipment. At the time, it was a good idea. It is not a primary purpose law meaning that in order to be exempt the equipment’s primary purpose would have to be to eliminate, treat, or control pollution. Some states had a clause that would sunset such exemptions in 25 years; however NH did not.
Mr. MacQueen established that the whole law is an abuse. Pollution control exemptions were given as an incentive to install proper pollution equipment. Today, the Federal government already imposes restrictions on companies. The State grants the incentive; however the municipality where the company is sited pays.
Jon Edwards commented that he researched taxes paid to Bethlehem for their landfill and found that in the first years they were paying nearly $200,000 through a PILT. Their tax bill has been steadily declining due to pollution control exemptions and RECs and they will be paying $16,000 in taxes in the coming year.
PILT. Mr. Sansoucy went over RSA 72:74 that allows for a Payment In Lieu of Taxes (PILT) for renewable generation facilities. A PILT would be good for both sides because it provides for certainty. He suggested that the City look at the opportunity of entering into a long term tax agreement. The certainty of the tax amount is worth something to both the company and the municipality. Banks like it and there is a certainty in the amount of valuation. Ideally the PILT should be on the table before permits are filed.
Councilor Danderson stated that there is another $79 million of energy in the city; he advocated for taking into account all renewable energy.
Councilor Landry asked how much of Laidlaw and Clean Power’s business plans are dependent on these credits. Skip replied that they are still viable without. NH law allows us to value power plants as real estate and the cost to build the plants is greater than their value. Councilor Landry asked if there is any movement in the PILT once it is negotiated and Mr. Sansoucy noted that the contract can be set to go up with the cpi or it can be open for negotiation every five years or some other means as long as it is agreed to by both parties.
Mr. Edwards made the point that the City needs to negotiate with the actual owner of the property.
Councilor Landry asked about the problem with Great Lakes Hydro and the possible loss of 15 megawatts; what is the fix? Mr. Sansoucy said that hardware on Goebel Street would fix the problem.
District Heating. With regard to district heating, Mr. Sansoucy said that he has been watching the issue and there is bad information going around. Much of the district heating information is from Europe from countries that ban the import of oil. It is so expensive; it would never get financed unless there was a mandate of 90% participation. In the U.S. there is a choice on how we heat our homes. Mr. MacQueen clarified that this expense would be providing that there is no infrastructure in place. Making use of the heat that is expended anyway to help other business still makes sense.
Councilor McCue established that the information the city has been given states that in the electric generating process, ¾ of the energy is wasted up the stack. Skip responded that they need to be 60% efficient for their permit for a gas fired plant. Bill Gabler noted that the biomass plant by Federal law has to be between 13-22%; Clean Power would be at 28%. Councilor McCue asked if it would be feasible to build a wood fired facility to generate electricity and in the future to retrofit to do district hearting. Skip indicated that they are not building for anything else but electricity. Add-ons detract from the job at hand.
Max Makaitis commented that hot water used by Laidlaw would have to be sent to a cooling tower and re-use would avoid dissipating it into air. Skip agreed that using the waste in this case, would be marrying good companies.
Robin Hood Rally Discussion
Representative Paul Ingersoll explained that a producer of reality shows is interested in bringing a road rally to New Hampshire and having Berlin be the host city on May 21 & 22. He stated that the Governor’s Office and Department of Transportation are in favor of the 17 mile rally in the North Country. The course has been settled on in an area of road that will be closed for two days from 8-5. Saturday night, there will be a conclusion banquet. Prizes for the event are substantial; however the entry fee is $5,000.
A number of police and fire personnel would be needed and paid for by the organizers. As the host community, Berlin could receive a check for $100,000. The Milan selectmen have agreed to send a letter of support.
Councilor Remillard added that Berlin would be the central location and the surrounding communities are in support. She reported that the promoters would make a payment to the City; however if they do not make their expected budget, then the City would have to put up 50% of the cost.
Councilor Rozek asked how much the city could be liable for and Councilor Remillard noted that the number would have to be calculated. Representative Ingersoll indicated that the rally will be showcasing Berlin.
Councilor McCue stated that he is familiar with the club through experience in Tamworth. He questioned whether this team has run one of these rallies before and whether the City would be dealing with someone who knows what they are doing. Councilor Remillard replied that this is the first time that they will be doing this type of rally.
Councilor Danderson voiced that he would rather they keep all the money and assure the City that it will not cost anything; he said his is not willing to bet with taxpayer money. Councilor Landry asked how this came to us and Representative Ingersoll reported that it came from conversation and it was seen as an opportunity to get people to come here.
Councilor Landry reasoned that we need events and Councilor Evans stated that he supports the endeavor; however he doesn’t feel we are there yet because of unanswered questions. He asked if there is typically a written agreement for such events. Mr. MacQueen responded that it depends on the type of event and he noted that with the Maine Car Rally there is no agreement and there has been no cost to the City. He added that if the event was in the city, we may require insurance. Representative Ingersoll said there would be no racing in the city, only a parade and banquet. Mayor Grenier asked for a monthly update.
Removal of T-1 Lines on Cates Hill
Chief Morency introduced Jennifer Cloutier who is a dispatcher and Telecommunications Manager. He reported that in 1996 the dispatch center at the Police Department was revamped and a T-1 line was added from the PD to Cates Hill. The line costs $500 per month. As technology advances, the line is outdated and it would cost $9,000 to convert it to fiber optics and there would still be a monthly fee. Six years ago it would have cost $57,000 to go wireless; the cost is now $18,000 and there would be no monthly fee. This would pay for itself in 3 years. There are no grants that cover such an expense; however review of the budget brought about an avenue to pay for the change with capital funds.
In response to Councilor Rozek’s questions about when the problems started with the current line, Ms. Cloutier stated that communications have had to be repaired at least yearly and have had to be repaired three times this year since December. Councilor Rozek confirmed that this problem causes a communication lapse between the station and police cars.
Mayor Grenier asked if the amount being requested is a true cost and Chief Morency noted that the price was arrived at by reviewing the State bid on communications. Councilor Evans confirmed that an amendment to the current Capital Improvement budget is needed to make the change. Mayor Grenier asked that the Police Department come back with a proposal on their budget night; however Councilor Evans was prepared to move it ahead for the next meeting. Mayor Grenier noted that there may be a need to achieve a 2/3 majority to change bond issues. Mr. MacQueen stated that a formal instrument such as a resolution would be necessary for what the chief has requested. Councilor McCue commented that there is less than $400,000 in the capital improvement budget to reallocate.
Assistant Fire Chief Discussion
Mr. MacQueen distributed a memo explaining the situation with the open position of assistant fire chief. There has been difficulty filling the position due to salaries in the bargaining unit. If everything remains the same, the assistant chief would make less than a firefighter first class. The solution would be to increase the pay of the assistant chief to a total of $61,000
Mr. MacQueen went on to say that paying for the increase would be offset with budget overruns. He noted that the assistant chief is the training officer, second in command, and he enforces the fire codes. Councilor Danderson contended that since the city hired code enforcement, perhaps the assistant chief position could be eliminated. Mr. MacQueen stressed the importance of having a training officer and a second in command in the absence of the chief.
Mayor Grenier stated that he understands the dilemma; however it is the result of the union going eight years without a contract and taking health insurance instead of a raise. He added that those employees kept their insurance and now the City is being asked for the money too. He said, if we do this, taxpayers get beat again.
Councilor Evans suggested hiring from outside the department. Chief Trull stated that there were candidates from outside. He suggested that a fee schedule could be created that would eventually pay for a good portion of the position. After some discussion, Mayor Grenier stated that if a fee schedule can be implemented, he could support the increase in pay.
Councilor Landry feared that if this problem is solved today, we will then create a new problem. Councilor Remillard asked what prevents us from putting this out again. Chief Trull answered that the further we go without an assistant chief, the further behind the department gets and eventually it will derail. Councilor Remillard noted that if the money is approved, hiring will be done internally. Mr. MacQueen acknowledged that there is no candidate that has agreed to this at this time. Mayor Grenier asked for a package with fee schedule for the Council to review.
Other
Mr. MacQueen distributed the 2007 tax lien list. He explained that once a property goes to tax deed, the owner has to pay three years worth of taxes, interest and penalties to get the property back.
Jon Peress is planning to go to the pre-hearing conference on March 11 at the PUC in Concord. EFSEC has set a public hearing and tour of the mill site scheduled for next Tuesday, March 16. Council as a whole may want to make statement.
Councilor McCue mentioned the final set of stipulations for EFSEC put forth by the committee led by Max Makaitis. He noted that there were a few he could not support.
Councilor McCue also stated that he forwarded a press release from NHRS relaying that they are being sued by cities and towns.
Councilor McCue acknowledged a letter from WREN requesting a road closure and asked if the Council is going to address it. Mayor Grenier indicated that it could be on a future agenda.
Adjournment
Councilor Danderson moved to go into non meeting per RSA 91-A:2, I. (b) Collective Bargaining; Councilor Landry seconded and the motion carried unanimously by roll call.
Councilor Danderson moved to adjourn; Councilor Landry seconded and the motion carried. The meeting ended at 9:30 p.m.
Respectfully Submitted,
Susan Tremblay
Administrative Assistant
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