NEWS BLOG |
Loveland's Independent News Source |
Fiscal Cliff Solution May Force Steep Loveland Water Rate Increases |
Politics of City Finance & TABOR Colorado's Taxpayer Bill of Rights (TABOR) limits the City Council's ability to raise general taxes without a consent of the taxed (ballot measure). Therefore, increasing tax rates for the city's general fund is difficult if not impossible for city politicians because taxpayers must approve any tax increases. However, fines and fees for services are not considered taxes and therefore can be raised simply by a vote of the city council. Those proposing the increased water rates claim the city doesn't have any debt associated with the water utility therefore operates, "debt free." This is not accurate. Loveland pays over $800,000 annually into a collective debt it entered into with other municipalities for the Chimney Hollow Project. Because utility rates are easier to raise than general taxes, most cities in Colorado have politicised their municipal financing decisions by finding innovative ways to transfer monies away from utilities and into the general fund. Loveland has also played this game by increasing PILT (a type of lease payment) to its water utility as a mechanism to transfer money collected from rate payers for water into the general fund. The problem with this accounting is the city is also now asking rate payers to invest in replacing the infrastructure the city charges them to use. LovelandPolitics covered this issue in a story entitled, "The Whole Story Behind Loveland's Increasing Water Rates" and reported, "The Council voted to increase the PILT (payment in lieu of tax) nearly one year ago in full knowledge the change would drive higher utility rates in 2012. Approximately $650,000 of artificial “cost” was added to the city’s various utility enterprise funds now lost inside the “Administrative” line item in the water utility’s budget. The total annual transfer into Loveland’s General Fund from the utility rate payers now tops $4.5 million annually; second only to Longmont as the highest PILT collecting in Northern Colorado." |
Water rates reflect many different factors including the raw cost of water (shares), long-term financing costs of capital improvements, transportation, storage and treatment. When comparing rates between cities it is important the distance of the city to its various water sources also be considered. Loveland's ideal location at its primary water source means the city doesn't have the same transportation costs as other municipalities so directly comparing rates with the above cities can be misleading. The chart above illustrates a correlation between city distances from Big Thompson River (considered a prime fresh water source for Northern Colorado) and residential water rates. Greeley is slightly lower than Windsor given its age and early investment in water shares and built infrastructure. Otherwise, each city's water rates correlate closely to its distance from Big Thompson which is only one source. |