WORTHINGTON — Passage of the RURAL Act by Congress and signing by President Donald Trump in late December is good news for Nobles Cooperative Electric, which faced the potential of losing its tax-exempt status simply by receiving Federal Emergency Management Agency grants for damage caused by the 2019 ice storm.
The one-page RURAL Act, introduced by Sen. Tina Smith (D-Minnesota) and Sen. Rob Portman (R-Ohio), was introduced early in 2019 to fix a mistake in the 2017 Tax Cuts and Jobs Act. The 2017 tax law changed the way government grants could be calculated by cooperatives. The grants were suddenly calculated as income, endangering the tax-exempt status cooperatives have when keeping non-member revenues below 15%.
For Nobles Cooperative Electric (NCE), still awaiting FEMA money from the April 2019 ice storm, authorization of the RURAL Act was crucial.
“Theoretically, if we did all of the work in 2020 and were reimbursed from FEMA, we would have gone over the 15% easily,” said NCE CEO and General Manager Adam Tromblay, who with other electric cooperative managers met with Smith in April 2019 to plead for change.
It wasn’t just FEMA money that would have jeopardized NCE's tax-exempt status, but any other grants it may have received for cooperative-led projects, such as economic development or broadband.
“After I heard from several Minnesota cooperative leaders that a mistake in the 2017 tax law threatened their tax exempt status, I went to work to fix it in a bipartisan manner,” Smith said this week. “I knew that without that fix, my years-long efforts to connect rural Minnesota, or my efforts to help bring federal disaster relief to rural communities hit hard by weather disasters, would be hampered.”
Smith said she was pleased the bipartisan bill was signed into law in December.
“Because of our effort, rural cooperatives in Minnesota and across the country can once again accept important federal grants without endangering their exempt status,” she said.
“Because their tax exempt status is protected, they’ll not only be able to invest in their communities, but also keep electric rates low for 1.7 million Minnesotans who rely on cooperatives to power their homes, businesses and schools.”
Tromblay offered his appreciation to Smith for pushing the RURAL Act bill through the Senate.
“We would like to add a big thank you to her,” added NCE’s Member Services Manager Tracey Haberman. “We asked for a lot of support from our membership; that really helped get the message across to Sen. Smith.”
Minnesota Rural Electric Association President & CEO Darrick Moe worked closely with Minnesota’s federal delegation in pursuing passage of the RURAL Act.
“Sen. Smith’s leadership was particularly instrumental — both in finding a workable legislative approach and in pulling hard to getting the effort over the finish line as it’s Democratic champion in the Senate,” Moe said. “Minnesota’s rural electric cooperatives are very appreciative of the efforts of our congressional delegation addressing this priority.”
Repairs continue from 2019 ice storm
Nobles Cooperative Electric received more than $879,000 from FEMA in November for damages related to the 2013 ice storm that hit southwest Minnesota. The money came just as the cooperative continues to work through the process for reimbursement from the 2019 ice storm.
“We’re hoping the 2019 storm will be wrapped up much more quickly,” said Tromblay, noting the Minnesota Department of Homeland Security, rather than the FEMA office in Chicago, is taking the lead on the 2019 ice storm reporting.
While all electrical lines are operating safely, there is still much work to be done to fully repair the NCE system that spans Nobles and Murray counties. The process includes getting bids for repair, doing installation and getting everything inspected so that NCE can be reimbursed. Disaster funding is split, with 75% coming from the federal level and 25% from the state.
“We would have loved to go out and fix everything 100%.” Haberman said.
“There’s a process,” added Tromblay, noting that if all of the repairs were done without that process, the cooperative wouldn’t receive its FEMA funding.
Nearly 40 miles of overhead lines damaged in the 2019 ice storm are considered eligible for FEMA reimbursement, even though Murray and Nobles County had a combined 77.75 miles of damaged line. Eligibility is based on a formula that considers how many poles were damaged, broken or leaning, how many insulators were on the lines, the number of splices made, poles replaced and anchors added. Photographic evidence was required for everything.
Nobles Cooperative Electric maintains 2,268 miles of electrical line in Nobles and Murray counties. Of that, 1,186 miles are underground. The cooperative continues to push for more underground placement of lines.
FEMA, while once allowing the cooperative to replace overhead lines damaged in a federal disaster with underground lines — as long as the cooperative covered the additional cost — now says the lines damaged must be replaced with like lines.
“Our standard practice is to build underground, but if we get zero funding from FEMA (for doing so), then sometimes we’re just going to go overhead,” Tromblay said.
In those instances, NCE Line Superintendent Brian Postma said they are installing bigger poles and bigger electrical lines that are better able to withstand southwest Minnesota weather.
NCE strives to put 20 miles of electrical line underground each year, Tromblay said.