OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http: //www. cga. ct. gov/ofa

sHB-6510

AN ACT ESTABLISHING A PUBLIC POWER AUTHORITY.

OFA Fiscal Note

State Impact:

Agency Affected

Impact

Department of Revenue Services, Office of the State Treasurer, System Benefits Charge Fund

See Below

Municipal Impact:

Municipalities

Effect

FY 10 $

FY 11 $

Various Municipalities

Revenue Impact

See Below

See Below

Explanation

The bill establishes the Connecticut Electric Authority as a quasi-public agency and allows the authority to contract with electricity generators to buy power for standard service but also allows the authority to own and operate power plants and to serve as a builder of last resort under certain circumstances.

The authority is given the power to hire an executive director, hire personnel, contract with the Connecticut Municipal Electric Energy Cooperative (CMEEC) for administrative services, and hire necessary consultants.

The operating expenses of the Connecticut Electric Authority will be paid for through the system benefits charge. The extent to which the new Authority costs will impact the rates paid to the system benefits charge is unknown.

The bill permits the authority to issue revenue bonds. This has no state or municipal fiscal impact because the bill specifies that this debt is not a direct or contingent liability of either entity.

It also permits the public power authority to issue $450 million in bonds secured by a state-backed Special Capital Reserve Fund (SCRF)1. Such bonds create a contingent liability for the General Fund that would only be realized in the event the authority was unable to make debt service payments. If the state were required to appropriate funds for this purpose, there would be a negative effect on the state's cash flow and a loss of short-term interest on the appropriated funds.

The bill requires the Office of the State Treasurer (OST) to act as the power authority's agent in handling the authority's funds. Since OST does not currently perform the duties indicated in the language, this requirement will result in an annual General Fund cost of approximately $100,000 beginning in FY 10 for staff time and computer resources to administer these duties.

The bill exempts the authority from state and local taxes and also exempts the authority's sale of property and services from the sales and use tax. This tax exemption will preclude a revenue gain to the General Fund and to municipalities in the future.

The bill also requires any person leasing a project from the authority to make a payment in lieu of taxes (PILOT), to the municipality that the project is located in, equal to the tax obligation the lessee would have to pay if they owned the property directly. This will result in a potential revenue gain to municipalities to the degree the authority leases out projects.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

1 A Special Capital Reserve Fund (SCRF) pays the debt service on bonds if the borrower is unable to pay all or part of the scheduled payments. When the SCRF has been drawn down in part or completely, a draw on the General Fund is authorized and the reserve is fully restored. The draw on the General Fund is deemed to be appropriated and is not subject to the constitutional or statutory appropriations cap. If draws on a SCRF continue, the annual draws on the General Fund required to refill it also continue.