Telecoms to fight Patrick tax proposal

Chronic bitter enemies -- cable television and telephone companies -- yesterday found something they could agree on: Both industries hate Governor Deval L. Patrick's plans to hit them with an estimated $78 million in new local property taxes as part of Patrick's crackdown on alleged corporate tax loopholes.

Telecom companies and industry trade groups are gearing up to try to block Patrick's proposal to repeal a state law dating to 1915 that exempts telecommunications companies from paying local taxes on their poles, wires, and other network equipment placed along municipal streets.

Patrick said it made no sense that in some municipalities electric companies pay local taxes on wires and gear that are installed on the same telephone poles as telecom equipment. In communities where Verizon Communications Inc. jointly owns poles with either NStar or National Grid Group PLC, the electric company pays tax on its half of the pole, but Verizon doesn't.

"It's a fundamental inequity, and we ought to change that," Patrick said at a public event Thursday.

Patrick is pushing the telecom tax in addition to seven changes in state corporate tax policy he's asking the Legislature to make to fund property tax reductions at the local level and help the state government close an estimated $1 billion funding gap in next fiscal year's budget. Combined, elimination of the seven corporate tax "loopholes," as the governor has called them, would bring in nearly $800 million in new state revenue over the next two years.

Revenue from the telecom plan, however, would go solely to the municipalities where the newly taxed equipment is located. In Boston, where Mayor Thomas M. Menino first started agitating for the right to tax telecoms two years ago, the new revenue would be used solely to reduce property taxes, and not fund city spending, the mayor has promised.

First adopted by the Legislature 92 years ago to encourage investment in the nascent telephone industry, the exemption remained standing without challenge until Menino took aim at it in 2005.

The mayor's request for that taxing right, however, died without action by Beacon Hill.

As part of their counterattack, Verizon and the cable companies argue that Patrick's plan would raise prices to consumers and discourage them from spending on new equipment.

"We're disappointed that the governor is pushing this agenda, especially when he wants to make sure that this is a business-friendly state and we have a telecommunications infrastructure that is second to none," said Paul R. Cianelli , the president of the New England Cable Television Association , which represents Comcast, RCN Corp. , Charter Communications Inc., and other companies.

Cianelli said cable and telecom companies already are heavily taxed: $56.6 million annually in franchise fees, $49.3 million in personal property taxes, $18 million in other real estate taxes, $43 million for emergency communications and services for the deaf, and $68 million in employer withholding taxes.

Verizon spokesman Philip Santoro said it is unfair for Patrick to lump the change with other so-called loophole-closing corporate tax changes, saying the original tax break "was adopted by state government to encourage investment, technology deployment, and innovation. New taxes will discourage investment, including in broadband, a crucial engine for economic development."

Verizon and the cable companies would not say how much, if at all, they would raise consumer rates to offset any tax increase.

NStar declined to comment on the matter, and National Grid did not return a call seeking comment.

Patrick has described the business tax changes, including the telecom matter, as "closing loopholes," but most business groups said the phrasing is a euphemism for raising taxes.

The local telecom tax issue is certain to set off one of the industry's biggest lobbying battles in years on Beacon Hill, where both Comcast and Verizon executives are substantial contributors to legislators' campaign funds.

Legislative leaders yesterday had no comment on Patrick's telecom plan, which aides don't expect to file as legislation until next week.

Peter J. Howe can be reached at howe@globe.com.