The cost of turning on a faucet or flushing a toilet has become a source of confusion for Lawrence residents.
The process remains as simple as ever, but trying to figure out how Lawrence consumers are billed for water and sewer services has become difficult. The city has introduced this confusion by proposing a policy that would require the city-owned water and sewer utility to make a special payment each year to the city’s general coffers. The payment would be an attempt to approximate how much the utility would pay in city property taxes if it were a privately owned company.
City commissioners recently balked at approving the proposed policy, and they were wise to do so. But they stopped far short of disposing of the idea, which is likely to be discussed again.
Here is an important point in that discussion: The city already is requiring the utility to make such a payment. No policy is in place that creates the rationale for the payment, but it has been occurring on a regular basis since David Corliss took over as city manager in late 2006. The city’s auditor began highlighting the lack of a policy in 2009 and noted that the amount of money transferred out of the city’s utility fund seems high compared to other communities. The auditor called for a policy to be created, but it took years for one to be proposed.
It has been disappointing how city management and commissioners have handled this issue. Their efforts have lacked, and continue to lack, transparency. The proposed policy essentially rationalizes the payment-in-lieu of taxes provision by arguing that Lawrence is a great community and surely the city’s water and sewer utility benefits from being in a great community. Thus, the utility ought to pay property taxes that support those services — everything from parks and recreation to the police department — that help make this community great.
But in reality, it is likely that another thought has entered the minds of city leaders. Lawrence’s largest employer and property owner, Kansas University, does not pay property taxes. However, it does pay a monthly water and sewer bill. KU not only provides many benefits to Lawrence and its economy, but also creates some challenges for the city’s tax base.
KU is the city’s largest water and sewer customer, so the university will pay a healthy share, through its monthly rates, of the estimated $1 million the city will collect to make its payment in lieu of taxes. The problem, however, is that ordinary residents who already pay property taxes also will be paying higher-than-necessary water and sewer rates in order for the city utility to make that payment. City commissioners should think long and hard about whether that is fair.
The proposed policy also has another glaring problem. The policy proposes only that the city utility make a payment that is equivalent to the city property taxes it would pay as a private company. But if the utility were a private company, it would pay property taxes to the county and the school district as well. If the city’s general services benefit the water and sewer utility, surely the county and school district’s services do as well. So, why would a fair policy only attempt to compensate the city for unpaid taxes? Perhaps because this policy doesn’t have much to do with equity but rather is an attempt to justify transferring one million ratepayer dollars into the city’s general fund.
The issue is not black and white. It is admirable that the city is looking for ways to fund its operations without raising property taxes, which come with their own flaws and inequities, but city commissioners should start over on this proposed policy. They should start the process by being honest about what they are trying to accomplish and then explore whether there are more equitable ways to meet their goals.