OPINION: Yes or No on Another Sewer Fund Tax
Former Council Member Garrett Keating comments on the City Council’s May 19 consideration of funding for sewers, maintaining recreational facilities, employee health benefits, the Budget and General Fund Reserves.
Sewers:
Council chose not to go forward with the “no tax”option and will likely choose one of the two tax options at the next Council meeting, June 2.
The Budget Advisory and Financial Planning Committee (BAFPC) had no issues with the no tax option, so it is odd that Council felt there was some risk associated with it. Other reasons were offered to accelerate the replacement program by adopting a tax rather than draw from the General Fund. Environmental stewardship?
Sewer emergencies are declining and honestly, those concerned with Bay water quality would do better to contribute to the repair programs of other cities that are far greater polluters than Piedmont.
Maintain recreational facilities? The biggest recreational need for Piedmont is field space and hours of use, not maintenance, but there are no proposals for that before City Council.
Increased contributions for retiree health benefits? A definite problem for the city. Staff suggested Council would not address this need until 2021.
The Sewer Fund only needs $1M within the next 3 years, after which it is quite stable and an accelerated replacement program can likely be achieved. Piedmont has historically maintained high reserves, 20% of the General Fund. The current reserve for 2014-2015 is estimated at 21.5% and this would decline to 15% with the $1M loan from the General Fund.
The General Fund dropped $1M between 2006-2007 and 2007-2008 with virtually no impact on city services and $2M was found in city accounts to address undergrounding over-runs. There are more than adequate reserves to address this short-term loan. And Council could lower that need even more when year end transfer tax receipts come in. Transfer tax receipts are headed for $3.4M and Council has budgeted for $2.8. That $0.4 – 0.6 excess could be transferred to the Sewer Fund and offset a loan from the General Fund. That excess will manage to find its way into city balance sheets, no doubt, but Council could help that “15%” by using it to reduce this new tax.
The final consent decree (“CD”) with the EPA has not been published; likely Piedmont and all cities affected by the CD will have more than the 20 years estimated in the report heard by Council May 19. Part of that recommendation is to complete our mainline in about 12 years. This is likely the best course of action as emergency repair costs will be sharply reduced and there is an economy of scale by phasing in large sections of our sewer. Regardless, in the past two years we completed 5% of our mainline at the current rate and would conservatively complete the remaining 35% in about 17 years.
State funds at very low rates and now amortized over 20 or 30 years, including all soft costs, are readily available for the accelerated phased in solution. Currently, the City has over $4M in the General fund: there is funding in place in the new maintenance and facility funds; the Police Department is fully staffed; and, as Garrett pointed out, there will likely be an additional $600k this year alone from the transfer tax to cover the $1M shortfall. I was hopeful that Council would not rely on the old and now unnecessary standby– tax a normally willing Piedmont electorate.
Some argue a new sewer tax is necessary so that we are good “environmental stewards.” The reality is that Piedmont has as nearly a high percentage of mainline sewer replaced as Emeryville (with its massive commercial tax base and no sewer tax), and Piedmonters at a much higher percentage have borne the significant cost of replacing their private sewer laterals. Piedmont is far ahead of other local cities in doing the right thing for the environment.