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Reducing Tax Revenues Used for Utilities <br />To the extent the City can reduce the property tax support for the utilities, it can use that tax revenue to <br />replace potential losses in local government aids or reduce the need to raise taxes or increase the tax rate. <br />Property taxes may be used for general governmental purposes. The City also collects a sales tax, which <br />totals about $200,000 per year and is dedicated to water, wastewater and/or harbor improvements. <br />In 2010, the City levied $134,707 in property taxes for the water fund and transferred in $292,500 in <br />sales tax revenues. In 2011 the water levy was $218,044 and the sales tax transfer was $202,442. The <br />wastewater fund has historically received $100,000 to $150,000 in property taxes each year, and is <br />budgeted to receive approximately $156,000 in property tax revenue in 2011. <br />The water rates proposed in this report would reduce the contribution from property taxes for utilities <br />from a total of $370,000 for both water and wastewater in 2011 to $150,000 for water only in 2012. <br />Future property and sales tax transfers to the wastewater fund are proposed to be eliminated. <br />Other Options <br />The City may reduce tax support further by implementing higher increases to water rates. The chart <br />below shows the sample monthly utility bill for three options that vary the amount of sales tax and <br />property tax transfers to the water fund. Reductions to tax support will result in higher water rates. The <br />chart below illustrates the impact on a residential utility customer and shows the difference in the usage <br />rates. Also shown is the incremental property tax paid, per month, by residential properties, that is <br />dedicated to support the utility system. Option 1 in the chart is the same as the proposed water and <br />wastewater rates listed previously in this report. The 2012 residential city taxes are calculated based on a <br />$95,000 valued home, before market value credit or other state property tax reduction programs. The <br />annual rate increases are assumed to occur each year from 2012 through 2016, and then the percentage <br />increase may decline. <br />Water Fund <br />$216,844 <br />$202,442 <br />Water -per mo <br />18.00 <br />27.50 <br />Sewer Fund <br />$153,638 <br />Sewer -per mo <br />26.20 <br />40.00 <br />Incremental City Taxes to support utility system per mo <br />13_38 <br />13_38 <br />$57.58 <br />$80.88 <br />Option 12012 <br />Option 12012 <br />Water Fund <br />$150,000 <br />$175,000 <br />6.75% <br />Water -per mo <br />19.22 <br />29.36 <br />Sewer Fund <br />1.00% <br />Sewer -per mo <br />26.46 <br />40.40 <br />Incremental City Taxes to support utility system per mo <br />$5_42 <br />$5_42 <br />$51.10 <br />$75.17 <br />Option 11 2012 <br />Option 11 2012 <br />Water Fund <br />$100,000 <br />$150,000 <br />8.00% <br />Water -per mo <br />19.44 <br />29.70 <br />Sewer Fund <br />1.00% <br />Sewer -per mo <br />26.46 <br />40.40 <br />Incremental City Taxes to support utility system per mo <br />$3.65 <br />53_65 <br />$49.55 <br />$73.75 <br />Option 111 2012 <br />Option 111 2012 <br />Water Fund <br />$ 50,000 <br />$100,000 <br />9.25% <br />Water -per mo <br />19.67 <br />30.04 <br />Sewer Fund <br />$ 75,000 <br />0.50% <br />Sewer -per mo <br />26.33 <br />40.20 <br />Incremental City Taxes to support utility system per mo <br />$4_61 <br />$4_61 <br />$50.60 <br />$74.85 <br />--N <br />