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Northwest Natural estimates rate hike if IP 28 passes

Northwest Natural estimates it faces an $11 million to $14 million annual tax hike if a controversial corporate sales tax measure wins voter approval in November.

Recouping that cost would likely entail raising customers’ natural gas utility rates by at least 2 percent, after five rate decreases in the last several years, a company spokeswoman said Friday.

The gas company’s estimates follow an analysis by the nonpartisan Legislative Revenue Office in May that showed Initiative Petition 28 would act largely as a sales tax on consumers. A middle-income family could see an increase in costs of about $613 per year for a middle-income family, according to the report.

If passed, the measure would impose on certain corporations an additional 2.5 percent tax on sales greater than $25 million in Oregon.

Revenue from Initiative Petition 28 could infuse state coffers with about $3 billion a year, stabilizing the state budget and growing public sector jobs by nearly 18,000 in the next five years.

Backers of the tax measure are pushing for that revenue to go toward education, senior services and health care.

Northwest Natural’s estimates illustrate how the tax could impact businesses and consumers.

The Legislative Revenue Office estimated that the tax would “dampen” the economy by slowing job growth in the private sector by 38,200.

Another report by the Oregon Office of Economic Analysis found that the average company subject to the tax could see their corporate taxes skyrocket from $200,000 to $2.2 million per year.

Northwest Natural, which serves about 640,000 customers in Oregon, now pays about $6 million per year in state corporate taxes, said Melissa Moore, spokeswoman for Northwest Natural. Under IP 28, the company’s corporate taxes could double or triple to up to $20 million, Moore said.

The estimated 2-percent gas rate hike from IP 28 accounts only for the additional cost in corporate taxes. Northwest Natural also anticipates additional indirect costs to its operations such as an increase in the prices of pipes, valves, vehicles, and insurance. Those costs could drive up rates further, Moore said.

“We support education and social services, but we don’t see this as the way to do it,” Moore said. “We are opposed to IP 28 because it’s a regressive tax that will increase costs to our residential and business customers.”

A Better Oregon, the union-backed nonprofit campaigning for the measure, said Northwest Natural’s numbers are inaccurate.

“Northwest Natural paid only $24,000 in state income taxes in 2014, a tiny percent of the $100 million in profits it made that year,” said Katherine Driessen, a spokeswoman for A Better Oregon. “So not only can the company pay more in taxes, it absolutely should.”

The percentage corporations have contributed to the state's income tax revenue has shrunk from 18 percent in the 1970s to 7 percent now, according to the Oregon Center for Public Policy.

Driessen noted that the Oregon Public Utility Commission would have to approve any rate increases, and that Northwest Natural could deduct part of the state corporate tax from their federal taxes.

“This is yet another example of huge corporations using scare tactics to avoid funding our schools and critical services,” she said.

The Public Utility Commission has to approve any utility rate hikes, but tax increases are one reason that the commission would consider granting a rate jump, said Michael Dougherty, PUC’s chief operations officer.

By Paris Achen
Portland Tribune Capital Bureau Reporter
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