NEW LAWS THAT IMPACT
MUNICIPALLY OWNED UTILITIES

Illinois Municipal League v. Illinois State Labor Relations Board

I. New Laws That Impact Municipally Owned Utilities

A. NEW FORMULAS FOR STATE UTILITY TAXES

As a result of the passage of House Bill 18 (Public Act 84-0307) (the "Act"), those municipalities that sell gas and electricity for consumption, not for resale, must implement new formulas in calculating state utility taxes0 on revenues received from the distribution of gas and electricity. Effective with bills having a meter reading date on or after January 1,1986, the gas revenue tax rate (see ch. 120, par. 467.17 111. Rev. Stats.) is 2.4 cents ($0.024) per therm of all gas distributed, supplied, furnished or sold to each customer, or 5% of the gross receipts received from each customer whichever is the lower rate as applied to each customer for that customer's billing period. The rate for electricity (see ch. 120, par. 469 111. Rev. Stats.) is .32 cents ($0.0032) per killowatt-hour, or 5% of the gross receipts, whichever is lower. Thus, tax rates are capped at 5% of the gross receipts received from each customer during a billing period, but may be less depending on the amount of gas and electricity distributed.

*This Act has no effect on the utility tax imposed by a municipality pursuant to the Municipal Code, Ch. 24, Par 8-11-1, 111. Rev. Stats. 1983.

The definition of "gross receipts" has been changed by the Act to exempt certain charges from the taxation formula resulting in the taxation of only the electricity or gas supplied. The following are now exempt from taxation:

1. Minimum service charges which occur whether or not electricity or gas has been consumed.

2. Service charges for returned checks.

3. Finance charges, late payment penalties and prepayment discounts.

4. Charges for reconnection of services.

5. Charges for relocation or replacement of facilities.

6. Facility construction costs paid by the customer.

7. Charges for repair, inspection or servicing of customer equipment.

8. Lease or rental charges for equipment not necessary for the supply of electricity or gas.

9. Any receipts from a sale to a customer who is prohibited from recovering the taxes for its customers.

10. Charges for tax liability and the accounting for Municipal Utility Taxes enacted pursuant to Sec. 8-11-2 of Chapter 24 of the Statutes.

The second area of significant change is the calculation of taxes for natural gas by "Therms". A therm is a 'measurement of energy (heat) and is defined as 100,000 B.T.U.'s per cubic foot by the Illinois Commerce Commission. Therms can be measured by a Calorimeter, an instrument costing around a half million dollars. Most, if not all municipalities, however, measure the distribution of gas through meters reading in cubic feet, a measurement of volume.

When working with public utilities, the I.C.C. defines a therm as 100 cubic feet, even though the two measurements are not exactly equal because of the nature of the relationship between gas and the energy it produces; the same volume of gas as can produce a different amount of therms. In making its calculation, the I.C.C. has defined a therm as 100 cubic feet of gas.

Because Calorimeters are prohibitively expensive,

February 1986 / Illinois Municipal Review / Page 21

and because the 100 cubic feet definition is used by the I.C.C. and natural gas is generally metered in cubic feet, it seems that municipalities should define a therm as 100 cubic feet of gas.

B. EXEMPTION—LOW INCOME CUSTOMERS BILLINGS

The passage of "An Act in relation to energy assistance for low-income persons" (Senate Bill 486; Public Act 84-1034) requires "public utilities" to enter into payment plans with low-income customers requiring them to make monthly payments of 12% of their monthly income for primary sources of heat and secondary utility sources. The Act provides that the definition of public utility is that provided in Paragraph 10.3 of "An Act concerning public utilities" (see Ch. 1112/3, par. 10.3 111. Rev. Stats.). That definition provides that utilities owned and operated by municipalities or owned and operated by lessees or operating agents are not public utilities. Therefore, municipal utilities are not covered by the new law and current billing practices regarding low-income customers can be continued.

II. Illinois Municipal League & Village of Hanover Park v. Illinois State Labor Relations Board _ N.E.2d —, 4-85-0179, January 21, 1986.

The Illinois Public Labor Relations Act, effective July 1, 1984, was enacted to regulate labor relations between public employers and employees, and also created the Illinois Labor Relations Board. This Act provided for "fair share" agreements, defined the right of public employees to organize and bargain collectively, and establish the right of certain public employees to participate in job actions against an employer. Additionally, the Illinois Labor Relations Board was created as part of the legislation to provide for enforcement of the Act and was charged with the administration of its provisions.

In February of 1984, the Illinois Municipal League, in conjunction with the Village of Hanover Park, filed a lawsuit in Sangamon County against the Illinois State Labor Relations Board and certain appointed and elected officials of the State of Illinois challenging the Act.

Specifically, the League alleged six issues for the court's consideration. First, with respect to fair share agreements, it was alleged that the Act requires payment by municipal employees for purposes which violate the First and Fourteenth Amendments to the United States Constitution. The position of the League is that the Act denies employees freedom of association and taking of property (money) without due process by forcing them to make payments to the labor organization. Second, it was alleged that the Act permits employees charged with the protection of public health, safety and welfare of the citizenry to strike their employers and thereby encourages municipal employees to abandon their duties resulting in a violation of the Illinois Constitution. Third, it was complained that there is a public policy of the state which prohibits public employees from striking and the Act violates this

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policy and violates rights historically granted to state citizens and protected by Illinois Constitution. Fourth, the IML alleged that Governor Thompson exceeded his amendatory veto power by making changes that altered the fundamental purpose of the legislation. Fifth, it was alleged that by permitting all employees other than security employees the right to strike, a special benefit was conferred upon security employees guarding prison populations and therefore was special legislation. Sixth, and finally, the complaint alleged that the Act violated provisions of the State Mandates Act by not stating specific reasons for exclusion of the Act from the Mandates Act. As a part of this allegation, the League asserted that this failure to comply with the State Mandates Act relieved municipalities from implementing the personnel mandate imposed by the Act.

In February, 1984, the trial court dismissed the complaint ruling that the IML lacked the standing to bring the claims asserted in the first and fifth allegations and that the rest of the allegations were not "ripe" for litigation at this time. The League appealed to the Fourth District Appellate Court. On January 21, 1986, the Appellate Court affirmed the judgment of San-gamon County Circuit Court.

In agreeing with the trial court with respect to the first and fifth issues, the court stated, "Counts I and V of the complaint alleged that the rights of public employees will be affected, rather than those of the Plaintiffs (IML). Applying the above principles, the League did not properly frame and present sufficient facts to warrant standing on the Constitutional challenges made."

In affirming the lower court decision on issues 2, 3, 4 and 6, the court addresses each of the issues individually and finds that there are no claims made which are ready for litigation.

The Appellate Court never reaches the issues raised by the specific allegations of the original complaint. Similarly, these issues were not addressed by the trial court. The dismissal of the suit occurred solely on technical grounds. The Appellate Court points out that this dismissal would not be a bar to future litigation on these points by stating, "our holding does not, however, preclude suit in a proper case." In previous portions of the opinion, the court notes that the employees governed by the Act, not municipalities, are the parties that stand to be injured by enforcement of the Act.

It does not appear that the dismissal of this litigation will be the end of actions centering on enforcement of the Illinois Public Labor Relations Act. A complaint filed in United States District Court for the Central District of Illinois, Gilpin v. AFSCME, et al. is currently proceeding towards trial. That complaint brought by individual state employees against AFSCME, and the parties named in the League suit address very similar issues as those raised by the IML. While a final ruling in that case may not provide municipalities with principles to clearly guide them, the constitutional issues raised by the IML may be resolved. •

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