Good Afternoon, Senator Gagnon, Representative Green and Members of the Joint Standing Committee on Taxation, my name if Michael Belliveau. I direct the Toxics and Pollution Prevention Project for the Natural Resources Council of Maine (NRCM). NRCM is the state’s oldest and largest environmental advocacy organization working for clean air, clean water and conservation of our natural resources.

We are testifying in support of LD 1570 because the existing property tax exemption for pollution control facilities is broken and needs to be fixed. Current law allows for a permanent property tax exemption (and a one-time sales tax exemption) for air or water pollution control facilities. This is an archaic policy left over from the 1960’s and 1970’s when it was a good idea to subsidize so-called end-of-pipe pollution controls before they were fully required by new environmental laws.

The policy needs to be modernized for several reasons:

Lack of Clear Environmental Benefit. The current program does little to reward modern environmental practices, such as clean production, which prevents pollution from being created in the first place. Instead it rewards companies that install traditional pollution controls that try to capture pollution at the end of the discharge pipe or on top of the smokestack. Companies benefit from this tax break by merely complying with environmental laws that already require pollution controls to be installed. There’s no incentive for companies to go ‘beyond compliance’.

Erosion of the Tax Base. Currently, about $300 million in property valuation is permanently tax-exempt, robbing municipalities of critically needed funding for schools and local services. State government also forgoes about $1.5 million in annual sales tax revenue under the tax exemption for pollution control facilities.

Too Much Red Tape. The current program creates a heavy administrative burden on the Maine Department of Environmental Protection (DEP) and the Board of Environmental Protection (BEP). Each tax exemption must be certified by DEP. Current statute requires DEP (and on appeals, the BEP) to determine the primary function, motivation and purpose of each pollution control facility. Disputes over such findings among taxpayers and municipalities frequently lead to administrative appeals to the BEP and litigation before the Superior Courts and the Maine Supreme Judicial Court. This is a waste of government resources that ought to be dedicated to environmental protection.

We should only give environmental tax breaks for truly clean production. This thirty- to forty-year old property tax break for pollution control facilities needs to be modernized.

L.D. 1570 would update the property tax exemption to promote clean production through pollution prevention and toxics use reduction. Here’s how. L.D. 1570 would:

• Repeal further access to the old tax break for pollution control equipment (while maintaining the exemption for taxpayers that previously qualified);
• Replace it with a more narrow tax exemption for new investments in clean production
• Define clean production as pollution prevention and toxics use reduction, while excluding traditional end-of-pipe pollution controls
• Set environmental performance standards to qualify for the tax break, including a 90% or greater reduction in pollution and results that are ‘beyond compliance’;
• Reduce fiscal impact on local and state government, while slashing administrative red tape and conflicts in interpreting ambiguities in the current statute.

We urge you to support L.D. 1570 with a vote of Ought to Pass. Thank you. I’d be happy to answer any questions you may have. (See Attachment for details).

L.D. 1570 (Cowger) would reward companies that invest in pollution prevention, while saving money for municipalities and state government. Here’s how the updated tax break under L.D. 1570 would compare to the old tax break for pollution control that’s embodied in current law: