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Archive for Monday, September 26, 2011

City to look at policy that would transfer money from utility rates into general fund

September 26, 2011

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Here’s one property tax break City Hall leaders aren’t crazy about.

Under state law, city-owned utilities — such as the city’s water and sewer department — aren’t required to pay property taxes on their assets. That means the multi-million-dollar treatment plants, the pipes in the ground, and the smaller pump stations and other facilities scattered throughout the city aren’t subject to a tax bill.

That’s different from an investor-owned utility — like Westar, for example — which pays millions in property taxes that ultimately are paid by customers through their electric rates.

But now, City Hall leaders are saying its own utility department shouldn’t get such a tax break. At their meeting Tuesday, city commissioners will consider a policy that would allow the city to transfer money paid by ratepayers into the city’s general operating fund to account for how much property taxes the utility would pay if it were a privately operated business.

“Like privately owned utilities who pay property taxes, city utilities benefit from public safety, parks and recreation, economic development, planning and development services, and other city functions,” a memo from City Manager David Corliss’ office to commissioners states.

But the idea is creating some questions.

“It is a rationale I think we need to talk about a little more,” said City Commissioner Mike Dever. “We need some feedback from the community on this.”

The new policy would not immediately increase water and sewer rates. That’s because the city already has been making a payment-in-lieu of property taxes type of transfer for the last several years, although it did not have a policy in place that specifically called for such a transfer to be made.

The lack of a policy has been an issue that the city’s auditor has raised multiple times during the last four years.

“I hate to say it is just a transparency issue, but to some extent it is,” said City Auditor Michael Eglinski.

In 2012, the city will have to collect about $1 million in water and sewer rates to meet the payment-in-lieu of taxes provision. The policy also would apply to the city’s solid waste service and its stormwater management program, which are both services that rely on rates instead of taxes. The solid waste service — the city’s trash service — would have to collect $14,376 in rates to make the payment, while the stormwater program would need to collect $73,397 in rates.

The proposed policy, though, is silent on whether the city’s utilities should be required to make a payment in lieu of taxes to the county and the school district. Private utilities, like Westar, are required to pay property taxes to those jurisdictions. Corliss on Monday said he didn’t think this new policy would put the county or the school district in a position to start asking for a similar payment.

“I guess I can see the argument, but historically we have looked at those as separate issues,” Corliss said.

The proposed policy also gives the city the authority to make transfers of rate money into the general fund for several other reasons. They include:

• A payment in lieu of a franchise fee. Most utilities — like electric, gas, telephone and cable utilities — pay a franchise fee in order to use the city’s right of way to house their infrastructure. The city’s publicly owned utility is not required to pay a franchise fee. But the proposal recommends it should make a payment to the general fund in order to compensate the city for its right-of-way. State law caps most franchise fees to no more than 5 percent of a utility’s gross revenues. Corliss, however, is recommending that the city be allowed to charge up to 7 percent to the city’s water and sewer utility. He said waterline breaks are a major problem for city streets, and thus justify a higher rate.

“Anybody who has driven down Kentucky Street can see the inconvenience of a waterline project,” Corliss said. “Even though the street is patched, it is never the same.”

For 2012, the policy would allow for $2.18 million in rates to be transferred from the city’s water and sewer fund to cover the payment-in-lieu of a franchise fee provision. For solid waste, the payment would be $766,912. For stormwater, it would be $206,675.

• The policy would allow the city to make a transfer to cover the cost of general services the utilities receive from the city, such as services from the legal department, human resources, payroll and other functions that are done by City Hall but would have to be paid for independently if the business were operating on its own. The policy allows for $969,140 in overhead charges to the water and sewer fund, $320,312 from solid waste, and $80,298 from the stormwater fund.

• In total, the policy would allow for $4.7 million in transfers of rate money to the city’s general operating fund in 2012. But Corliss notes that the policy does not require the city to make the full transfer. In 2012, the city is estimated to transfer $3.6 million.

Corliss said he disagrees with some concerns that the transfers are an attempt to generate money for the general fund without having to raise the property tax mill levy, which historically has been politically difficult at City Hall. Water and sewer rate increases, however, have received more support from commissioners in recent years.

“I don’t think that is the case,” Corliss said. “I think the policy we have proposed provides a good rationale, but we will want to continue to see if we can refine it.”

Comments

Jonathan Fox 2 years, 11 months ago

So let me try and get this straight, the city is going to tax the city? We're going to raise the utility rates to cover property taxes of public property as if it were private property?

So instead of raising property taxes, we're raising utility rates.

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Charles McPheeters 2 years, 10 months ago

Your got it Fredthemechanic1213, A utility fee is not a tax??? Next thing to change is the sales tax to a service fee?? And how about changing income tax to membership dues?? I just love this pretty soon we won't have to pay any taxes.

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Bob Forer 2 years, 10 months ago

Lol. Both of you are right on. The city needs to call a spade a spade, and quit the BS. Apparently, our city fathers want more money and they are eyeing an increase in city utilities to satiate that hunger.

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juma 2 years, 11 months ago

This reminds me of the time I worked in Somalia and we donated a shipload of water well equipment; pumps, rigs, etc.. The Somalia Govt wanted us to pay Duty on the gift. Result: ship returned to Europe with the equipment. Point is: Water and Sewage are Public , repeat PUBLIC, services that have numerous inherent costs and benefits. Where do the City Kommission plan to squander the $$$?

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skinny 2 years, 11 months ago

It is time we vote these thieving con artists out of Office. These Unities and profits belong to the citizens of this fine City. Time to get with an attorney and put a stop to this right now!!

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NotASquishHead 2 years, 11 months ago

Corliss... The snake in the weeds. He is one of the most devious politicians I have ever met. I think he probably taxes his own children. I just hope he treats them better than he does his staff.

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skinny 2 years, 11 months ago

Another thing, I think Corliss has forgot the reason our forefathers even started their own sewer, water, and trash service. They did so in order to save the citizens of Lawrence money. This kind of defeats the whole purpose of the City running its own utilities does it not? I am sure the Citizens of Lawrence had no intention then or now of the City making millions of dollars off us just so that the City could tax us even more! I think we need to switch to the City of Lawrence Commissioners instead of a City of Lawrence Manager!!!

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Carol Bowen 2 years, 11 months ago

Government entities always look for more revenue in tough economic times. This idea does not make sense. I can't even sort out the logic. Maybe, this is because it's the only operation that brings in money other than taxes. With this logic, we could rationalize a tax on KU.

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kansasredlegs 2 years, 11 months ago

I understand Corliss' idea, but what I don't like about is that the City created the problem he refers to in his examples. The reason that city streets are continuously ripped up & patched is because Corliss' and his past mentors Wildgen & Buford & the complicit Commissioners didn't have the guts to move the infrastructure into city-owned right of way and out of the roadways. Most cities no longer have manholes in the middle of their streets, but good ole Larrytown still does and when that water line breaks, the street has to be ripped up. Had the city not got into the water business, the city would have forced the private utility to relocate in accordance with its franchise agreement. Funny, how the city now wants to treat its own utility like a private one so the city-owned utility can pass on these fees, i.e. Taxes, to the end user, YOU.

Instead of finding ways to live with less during difficult times, Corliss & staff just try to find "new" ways to get blood out of a turnip. When does Corliss go on vacation, I think it's time to pull a Basehor!!! Might want to think twice before missing a commission meeting Dave!

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Richard Heckler 2 years, 11 months ago

How is this scheme a property tax break?

What does the city intend to do with this money?

If this is surplus money why the rate increases?

Why not suspend the "reckless growth policy" thus curtailing the expansion of our tax bills?

How is it that utility rates are not taxes?

Why build a new pork barrel high dollar sewage treatment plant for projects that which do not cover the cost? :

Our city's current budget crunch could easily be tied directly to infrastructure expenses needed to serve new residential developments. The community is way over extended in this regard.

If residential growth paid for itself and was financially positive, we would not be in a budget crunch. But with increased numbers of houses you have increased demand on services, and historically the funding of revenues generated by residential housing does not pay for the services, they require from a municipality.

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Richard Heckler 2 years, 11 months ago

Please note USD 497 handed down a tax rebate for the Masonic Temple project. How in the world can USD 497 afford to turn down a new tax dollar source?

Simply because the Masonic Temple was tax exempt is no reason to turn down a new source of support for the public schools.

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irvan moore 2 years, 11 months ago

oew hit it on the head (sort of like corliss does to the taxpayers), we don't need a bond issue, we just need to use the money collected for it's intended purpose. i think they want to use those funds to pay for "improving" the new parking garage.

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sherbert 2 years, 11 months ago

This should not be implemented without a public vote.

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somedude20 2 years, 10 months ago

my water and sewer bills are high enough already! I live by myself in a small apt and do not use all that much water (heck the costs are so high I should start to use hand sanitizer instead of a shower) and still get $44-$46 monthly bills.

The water bill is just too damn high!!

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Eride 2 years, 10 months ago

I love this tax. What a wonderful idea. Let's enact the mother of all regressive taxes!

Does the city park and rec system pay property taxes? Does the city pay property taxes on city hall? This is laughable. It is just a way to impose a higher tax rate at the whim of the city by imposing higher utility rates. Something that harms the poor much more then the rich.

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Don Whiteley 2 years, 10 months ago

How magnanimous of the city to agree to tax their property at the same rate they tax the electtic and gas companies. However, since taxpayers pay the entire cost of the city's water department, this is just a way that the city can hide another tax increase. To top it off, the city's water department is one of the most inefficiently run operations in the country. My water is the most expensive utility I pay for, topping even my electricity and gas bills whenever I make the mistake of trying to water my yard; 4x higher than eqivallently sized cities.

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beaujackson 2 years, 10 months ago

Move to Lawrence and be taxed to death!

Time for the Corlis retirement party.

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optimist 2 years, 10 months ago

If this were a private company we would likely call it Enron. There is no need to create this complexity. It is simply a way to hide taxes in the future and call it a rate or user fee increase. Either way it costs us all more. If this change occurs it's a sign we need new leadership at the city both on the commission and in the city manager's office.

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cowboy 2 years, 10 months ago

I might be wrong but I believe that those dollars used to go to reserve many years ago. Thats where they should go ! The utilty rates charged by the city are just ridiculous not to mention the every year increases and the crooked " sewer charges "

Heres some community feedback for ya.....quit screwing us over !

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nouseforaname 2 years, 10 months ago

Sewer rates reflect the amount of energy and resources it takes to not only treat wastewater, but to also comply with the limits of our NPDES permit. It is really expensive to run a wastewater treatment plant, but it is worth it since its effluent is sent back into the river (unless you want the people downstream to be literally drinking our poop). On top of that, the sewer rates also help maintain the sanitary sewer system, which, I don't know about you, but I like walking around outside and not encountering raw sewage and I like having what I flush stay flushed. If I have to pay $4.94/1000 gallons a month to ensure that my community stays healthy then sure, that's money incredibly well spent. Complaining about having to pay for a decent sanitary sewer system is totally a first world problem. Somewhere, there is a small orchestra of polio-ridden children playing just for you.

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Stu Clark 2 years, 10 months ago

I have never been able to understand the cost of water in Lawrence. Water in the LA area is transported hundreds of miles (70% of it is used for irrigation). Lawrence is practically surrounded by water and yet it costs about 3 times as much.

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nouseforaname 2 years, 10 months ago

False. Water in the LA area costs $4.59/1000 gallons ($3.437/100 cu. ft. for Schedule A residents for first quarter 2011-2012) whereas water in Lawrence costs $3.52/1000 gallons.

Source: http://www.ladwp.com/ladwp/cms/ladwp001068.jsp http://lawrenceks.org/utility_billing/rates

Lawrence water rates are actually competitive with the surrounding cities. People get confused by the water bill because it includes water, sewer, trash, stormwater, and state taxes. Sewer rates are going to be higher than water because it takes a lot more energy, time, and resources to treat wastewater than drinking water. Unless you think that the wastewater plant runs on magic (although the microbiology of it is kind of magical).

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Kontum1972 2 years, 10 months ago

hanging is too good for these scoundrels.......

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Kontum1972 2 years, 10 months ago

wheres the KBI when u need them

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irvan moore 2 years, 10 months ago

corlis + cromwell = lots of screwed taxpayers

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jesse499 2 years, 10 months ago

I thought Bernie Madoff was in jail for his Ponzi scheme turn out he's in Lawrence under another name running another one.

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