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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



Opinion No. 5944

August 5, 1981


Tax abatement for gas transmission company

A gas transmission company subject to the federal public utility holding company act is a public utility and is not qualified to receive a tax abatement under 1978 PA 255.

Honorable Charles H. Varnum

State Representative

The Capitol

Lansing, MI

You have asked for my opinion regarding the availability of tax abatement under 1978 PA 255, as amended; MCLA 207.651 et seq; MSA 7.800(51) et seq, known as the commercial redevelopment act, for an office building being constructed by Great Lakes Gas Transmission Company ('Great Lakes'). You also indicate that Great Lakes is partly owned by American Natural Resources, a utility holding company. (1)

Under 1978 PA 255, supra, Sec. 5(1), cities, villages, and townships may extend tax incentives through a commercial redevelopment district for real property improvements on land in four general categories: (1) areas composed of predominantly obsolete commercial facilities, (2) land cleared due to fire damage or urban renewal, (3) cleared or vacant land within the boundaries of a downtown development authority or an urban redevelopment corporation, or (4) property which was owned by a local governmental unit and subsequently conveyed to a private owner and zoned commercial.

Once the community has established a commercial redevelopment district, 1978 PA 255, supra, Sec. 6, authorizes companies located within it to apply for a 'commercial facilities exemption certificate' based on their proposed construction, replacement, or restoration of commercial facilities. With a valid certificate, companies pay a 'commercial facilities tax' in lieu of regular property taxes. 1978 PA 255, supra, Secs. 9 and 12. The commercial facilities tax is calculated in one of two ways. First, new construction or replacements are taxed at 50 percent of the otherwise applicable rate for up to 12 years. Second, renovation projects pay taxes based on the valuation of the property immediately preceding the renovation, and that valuation may be frozen for up to 12 years. 1978 PA 255, supra, Secs. 12(2) and 12(3).

While commercial facilities generally qualify for the tax abatement, 1978 PA 255, supra, Sec. 3(3)(b), specifically excludes 'property of a public utility.' Thus, if Great Lakes is a public utility, the building which it is constructing would not meet the requirements for tax abatement under 1978 PA 255, supra.

1978 PA 255, supra, provides no definition of the term 'public utility.' According to the applicable rule of statutory construction as stated in Grand Rapids Gravel Co v Dept of Treasury, 14 Mich App 677, 681-682; 166 NW2d 53 (1968):

'In the absence of a statutory definition of a term, 'it is an accepted rule of construction, that words of a statute are to be given their plain and ordinary meaning, for it is to be presumed that the legislature, not having indicated otherwise, so intended.' 22 Callaghan's Michigan Civil Jurisprudence, Sec. 121 p 479.'

In White v Ann Arbor, 406 Mich 554, 575; 281 NW2d 283 283 (1979), Justice Moody's concurring opinion noted:

'[While] the term 'public utility' has eluded precise definition, this Court has defined the term as follows:

"Utility means the state or quality of being useful. Was this plant [waterworks company] one useful to the public? If so, it was a public utility.' Schurtz v Grand Rapids, 208 Mich 510, 524; 175 NW 421 (1919).'

The organization and operation of Great Lakes, a Delaware corporation, was discussed extensively in Great Lakes Transmission Co v Public Service Commission, 24 Mich App 77, 78-79, 81-82; 180 NW2d 59 (1970), which considered the jurisdiction of the Public Service Commission over securities proposed to be issued by Great Lakes:

'Great Lakes is a natural gas company subject to regulation by the Federal Power Commission by virtue of the natural gas act, 52 Stat 821 (1938) et seq., 15 USC Sec. 717 et seq. The FPC by order authorized Great Lakes to construct the above pipeline. One of the conditions of that order was that Great Lakes submit a financing plan satisfactory to it.

'By virtue of the Public Utility Holding Company Act, 49 Stat 838 (1935) et seq., 15 USC Sec. 79, et seq., Great Lakes is also subject to regulation by the Securities and Exchange Commission. . . .

The Public Utility Holding Company Act, supra, applies to any gas utility 'company' which owns or operates facilities used for the distribution at retail [of] natural or manufactured gas. This act declares, inter alia, that the national interest requires that investors and consumers be protected against the adverse effects caused when 'such securities are issued by a subsidiary public utility company under circumstances which subject such company to the burden of supporting an overcapitalized structure and tend to prevent voluntary rate reductions'.

'There is no dispute that Great Lakes is subject to the jurisdiction of the SEC. . . .'

Thus, Great Lakes was found to be a public utility subject to the Public Utility Holding Company Act, 15 USC, Sec. 79. But see Michigan Gas Storage v Public Service Commission, 405 Mich 376; 275 NW2d 457 (1979), generally as to the jurisdiction of the Public Service Commission over the proposed issuance of securities by public utilities.

In 1939 PA 3, as amended; MCLA 460.1; MSA 22.13(1), which established the Michigan Public Service Commission, the term 'public utilities' includes pipeline companies, such as Great Lakes, in Section 6 thereof as follows:

'[The] public service commission is further granted the power and jurisdiction to hear and pass upon all matters pertaining to, necessary, or incident to the regulation of all public utilities, including electric light and power companies, whether private, corporate, or cooperative, gas companies, water, telephone, telegraph, oil, gas, and pipeline companies, motor carriers, and all public transportation and communication agencies other than railroads and railroad companies.' [Emphasis added.]

It is my opinion therefore, that in light of the usage given the term 'public utility' in Michigan law and the previous judicial recognition that Great Lakes is subject to the Public Utility Holding Company Act, supra, Great Lakes Gas Transmission Company is a public utility and, accordingly, does not qualify for tax abatement under 1978 PA 255, supra.

Frank J. Kelley

Attorney General

(1) The 1980 Annual Report of American Natural Resources stated the following about Great Lakes:

'Great Lakes Gas Transmission Company operates an interstate pipeline system extending from the Minnesota-Manitoba border to the borders of Michigan and Ontario. American Natural and TransCanada PipeLines, Ltd., of Toronto, Canada, each own 50 percent of Great Lakes. Most of its income is derived from transporting Canadian gas from Manitoba to Ontario, although gas is also sold to U.S. customers, including Michigan Wisconsin Pipe Line Company.'


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