Increased Property Taxes for Sewers?
How should Sewer Fund money be used?
In the 1980’s, Piedmont voters approved a special parcel tax to pay for sanitary sewer rehabilitation of Piedmont’s aging sewer system. Voters were informed that the tax was needed specifically for updating the sanitary sewer system. (Sewer Tax amounts can be found on property owner’s Alameda County property tax statement.)
Sewer tax revenues were and are deposited into Piedmont’s Sewer Fund. However, soon after establishing the Sewer Fund, Piedmont needed additional revenues to support City services. Items historically paid for with General Fund monies were reallocated to the Sewer Fund; for example street sweeping, some tree maintenance, staff salary and other ad hoc public works maintenance activities. Records of hours worked by public works employees and projects completed using Sewer Fund money were not kept.
Over the years, more money was taken from the Sewer Fund to pay for ongoing public works maintenance items, rather than primarily being reserved for costs associated with rehabilitation of the sanitary sewer main system, emergency repairs, and maintenance of sanitary sewer mains.
Transferring funds from the Sewer Fund to the General Fund to pay for ongoing City services has allowed General Fund monies to be freed up and available to pay for other items. In recent years these have included employee benefits, utility undergrounding payments ($2.5 million), special capital projects (Blair Park $800,000 and Civic Center Development plans), and increases to the General Fund Reserves.
The FY 2014-15 Budget proposal continues the practice of transfers from the Sewer Fund to the General Fund with a $780,000 allocation.
“The City reviewed the transfer from the Sewer Fund to the General Fund and made some adjustments based on actual costs. First, minor sewer maintenance were being charged to the General Fund for approximately $150,000 and reimbursed through the transfer. The City will begin charging these costs directly to the Sewer Fund in FY 2014-15. Second, after reviewing time spent by the Public Works Department, maintenance and fuel costs for vehicles, and administration costs; the transfer is estimated at $780,000. Staff will continue to refine the estimate as this is the first year using this process.” Excerpted from the City Administrators report
In 2012, the City proposed a ballot measure consisting of a large increase in the Sewer Fund parcel tax to cover capital improvements to the sanitary sewer mains. At the time, no suggestion was made that the City should or could cease the heavy draw down on the Sewer Fund monies to pay for normal City services. The increased sewer parcel tax was not approved by voters. Yet, the City continues to consider the Sewer Fund a source of monies for regular ongoing maintenance items rather than primarily a fund to pay for EPA required sewer rehabilitation.
The recently presented FY 2014-15 Piedmont Budget Proposal states:
The City of Piedmont is in a financially sound and stable position. As was the case in Fiscal Year 2013-14, we are projecting a positive net income for FY 2014-15. This net income is estimated at $699,687 and will bring the projected ending General Fund [Reserve] balance to $4,232,099, which is 19.1% of total expenditures, inclusive of debt service.
In addition to the above noted measures, the City continues to enjoy a strong and improving economy which is driving a robust real estate market, resulting in Real Property Transfer Taxes (RPTT) projected at $3,000,000 for FY 2013-14.
Overall, the proposed budget ensures no reduction in the range and quality of services which City of Piedmont staff provide to the community. Importantly, it also ensures our ability to continue to set aside funds for the maintenance of our city facilities and equipment replacement needs. Excerpts from the City Administrators report.
The City Council’s Budget Advisory and Financial Planning Committee (BAFPC) optionally suggests increased taxation to accelerate sewer rehabilitation. Alternatively, the BAFPC suggested a temporary $1.2 to $1.4 million loan from the General Fund to the Sewer Fund in order to replace the remaining one-third of sewer lines ahead of schedule. (The most problematic lines have been replaced first-175,000 lineal feet of the total $269,000 feet.) Nevertheless, the Council’s Budget Advisory and Financial Planning Committee (BAFPC) found the Sewer Fund has adequate funds to proceed on schedule to meet the requirements of the Environmental Protection Agency (EPA) for rehabilitation of the old sanitary sewer mains.
The BAFPC concluded:
“The net result of our analysis is that the Sewer Fund does not have an operating deficit problem or a long term revenue problem, but a short term capital need for the replacement of the remaining original sewer system.”
To accelerate the scheduled completion of sanitary sewer ahead of the EPA requirement, the BAFPC looks to additional funding or loans. Projecting future construction costs, it is anticipated there would be a cost saving by replacing the remaining older lines not in one early phase, but in three equal phases over the next 12 years.
A significant part of the Public Works Department’s budget comes from the Sewer Fund. The BAFPC noted the $300,000 emergency repairs budget for the Sewer Fund without indicating if the tasks performed are emergency repairs or potential General Fund expenses.
It is unknown if the Budget Advisory and Financial Planning Committee considered the appropriateness of current drafts made on the Sewer Fund to cover Public Works Department expenses.
The Council will consider the Sewer Fund at their May 19 meeting.
Read the Budget Advisory and Financial Planning Committees Report to the City Council.
Read the City’s proposed budget for 2014-15.
It is an outrage that we have been taxed for the Sewer Fund when the money for which we were being taxed has been given to another department. Raise this tax again? I seriously object. This article states “the Sewer Fund has adequate funds to proceed on schedule to meet the requirements of the Environmental Protection Agency (EPA) for rehabilitation of the old sanitary sewer mains.” If there is adequate funding, why on earth would you raise taxes yet again?
Best regards,
Laurie Field
In 2012 the City stated $11M was needed to complete the mainline sewer system and in an accelerated time frame as required by the EPA. I signed the ballot measure in opposition because neither was true. At the time it seemed about $5M was needed but documentation was incomplete. Now in 2014 the Budget Advisory and Finance Planning Committee (“BAFPC”) has found the shortfall to be $1.2M to $1.4M to complete the sewer system in the same accelerated manner. New City Administrator, new numbers? To be fair to the thoughtful work of the BAFPC, the most cost effective approach may be to undertake and complete the mainline sewer replacement by the use of the available State loan program.
The $1.2M – $1.4M shortfall is temporary as (1) loans payments for completed phases I thru IV sunset in coming years, and (2) The City allocates $300,000 annually for emergency repairs which will reduce substantially as the remaining 35% of the system needing rehabilitation is completed. We currently have over $4M in the General Fund, accelerating transfer tax revenue (at an all time high), two funded new accounts for facilities and maintenance and full Police staffing. The General Fund is in good shape and money can be “loaned” to the Sewer fund and then paid back.
The City has stated there are only emergency funds available to complete the sewer since the failed 2012 tax. Since then another 5% of the mainline sewer has been replaced, or about 2.5% annually. 35% of the mainline sewer is left to replace.
Are we to believe that the EPA will demand that all 93,000 lineal feet of the remaining system will require replacement in the next 20 years? I’m not convinced of this!
Are we to believe that the monies generated by whichever method the Council chooses will go into the sewer projects? History tells us no!
It’s time to put the reins on the never-ending desire to spend, spend, spend!
When I first read this the term “bait and switch” popped into my mind.
It is still there.