Senator Deidre Henderson
Representative Dean Sanpei
Representative Keith Grover
Representative Keven Stratton
Representative Margaret Dayton
Representative Norm Thurston
6 Feb 2017
Dear Senators and Representatives,
The Provo Municipal Council is in the midst of a multi-year effort to better align our fees and other revenue with the costs of providing the related services. Having services paid for by the people receiving the services is a good general principle of governance. I believe I understand the motivation behind House Bill 164 - Municipal Enterprise Fund Amendments, which, as currently proposed, would limit the ability of cities to transfer money from enterprise funds to our general funds. It follows this principle to limit the use of the money collected in power bills to power related costs.
But there are other principles of good governance which must be balanced. One such principle is that the more local government is, the more responsive and accountable it can be. The circumstances in Provo are different than in Salt Lake or in Fairfield. There should be a compelling reason to restrict the freedom of local communities to govern themselves and to tailor the revenues and expenditures of their own communities to meet their own needs.
Provo is home to some excellent institutions. We love having them as part of our community. They are a part of our identity. We enjoy playing host to both the institutions and the many residents of other cities who frequent them. These institutions and their patrons benefit from the general services that the City provides -- parks, streets, public safety. They add to the cost of providing these services but may not directly pay for these services through property taxes. While this is not unique to Provo, I do not know of another city in the State where roughly half of the land is tax-exempt.
Roughly 19% of our general fund revenue comes from enterprise fund transfers. Our utility rates are still competitive, below the average in the area. Provo residents benefit from the sacrifices of earlier generations who invested in creating publicly owned utilities. Our residents are in essence our shareholders. The dividends that are paid out to shareholders in corporate utilities are returned to our residents in the form of lower property taxes, possible because of our ability to transfer money from our enterprise funds to our general fund.
If HB 164 is passed, our utility rates will go down, and our property taxes will have to go up to maintain the same levels of service that the City currently provides. Because so much of our property and so many of our service generators are tax exempt, the magnitude of the property tax burden is multiplied on those who do pay property taxes.
In the case of Provo, the principles of government being as local as possible and of having services paid for by the people receiving the services are both best by not passing HB 164.
Thank you for reading and for your service to the people of Utah.
Sincerely,
David Harding
Provo City Council -- District 5
Background information, compiled by the Administration of Provo City:
ReplyDeleteHouse Bill 164 "Municipal Enterprise Fund Amendments" is on the legislative calendar awaiting third reading in the Utah House of Representatives. Once it passes 3rd reading it will proceed to the Senate.
HB 164 limits the ability of cities to transfer money from their enterprise funds to the General Fund, except to pay a proportionate share of the city's overhead costs directly attributable to the operation of the enterprise.
Our analysis indicates that the bill would have significant impact in Provo. Our transfer is nearly $10 million, and we consider it a dividend to the residents and businesses of Provo City. The transfer amounts to 19% of the total general fund budget.
The attached document summarizes the bill and the impact. A copy of the legislation and the legislature's fiscal note (from their perspective) are also attached.
Mayor Curtis, Wayne Parker, and Corey Norman are working with ULCT and other cities to defeat the bill. Council leadership has put a resolution opposing HB 164 on the agenda for Tuesday's Council meeting.
It may be helpful to contact our [5] local Representatives and 2 Senators to express concern and opposition to the bill.
Some talking points:
Provo City uses the general fund transfer to fund street maintenance, public safety, snow removal, and other general fund services. The transfer amounts to 19% of the total general fund budget.
Provo's property tax base is limited because almost 50% of the city is exempt from property taxes, thus the main way to have these entities participate in the costs of the city is through utility charges.
Provo considers the transfer "a dividend to the residents and businesses" of Provo
Provo's property taxes for general operations provides $4.7 million (that does not include debt, etc.). We would have to increase the mil rate about 239.5% to make up the difference.
Overall, Provo generates $11.24 million from property taxes. The increase to cover the loss from HB 164 would require a 19% overall increase in property taxes for the 50% of the city that pays them.
Since any increase will require Truth-in-taxation hearings, we could point to HB 164 as the culprit for the increase. Meanwhile BYU, the LDS Church, the State, the Federal Government, the County, the School District and other property-tax exempt properties in the City would contribute nothing to fund street maintenance, public safety, snow removal, and other general fund services they benefit from.
Some data provided by the Mayor's Office:
a smaller home would save $150 in utilities but pay $223 more in property taxes, net increase of $73.
medium and large homes would net slightly above even.
a small restaurant would see a utility savings of $1325 but a property tax increase of $1867, a net increase of $542.
a grocery store would save $17,000 in utilities, pay $9,178 more in taxes, a net savings of $7821.
a large taxable employer (office building) would save $60,000 in utilities but pay $148,575 more in property taxes, a net increase of $88,575.
a large tax-exempt employer would save $223,200 in utilities and pay nothing in property taxes.
Here are the contact email of Senators and Representatives who cover parts of Provo, in case you are interested in contacting them:
ReplyDeleteSenator Curt Branble curt@cbramble.com
Senator Deidre Henderson dhenderson@le.utah.gov
Representative Dean Sanpei dsanpei@le.utah.gov
Representative Keith Grover keithgrover@le.utah.gov
Representative Keven Stratton kstratton@le.utah.gov
Representative Margaret Dayton mdayton@le.utah.gov
Representative Norm Thurston normthurston@le.utah.gov