The city council has narrowed its options for structuring a transportation utility tax, an idea that council members are exploring but to which they have not yet committed themselves.
Council members met Thursday to narrow the scope of possible transportation utility structures with the idea of having a transportation utility ready for 2022 if the council decides to pursue it.
Council President Sue Conley and member Jim Farrell were absent.
A transportation utility would function like a water, stormwater or trash utility, using a user-based fee to pay for road repair.
Members agreed that the current system for funding road maintenance is not sustainable, but they all want to learn more before committing to a utility.
No council member has firmly pushed against the utility at this point.
Since 2016, the city has committed to repairing 12 miles of road each year, a task Finance Director Max Gagin said is becoming increasingly expensive.
The city borrows money to pay for road maintenance. With increasing costs, the city is looking at significant increases in debt—and therefore interest payments—over the next 10 years.
Three options for structuring a transportation utility were presented to the council, and all three would provide long-term savings for residential taxpayers compared to how the city currently pays for road repair, according to analysis by an independent group hired by the city.
Ten percent of the utility would be fixed cost. The other 90% would be based on a rate that depends on a property’s classification: residential, commercial, industrial, etc., Gagin said.
These options were presented:
- Create a transportation utility fee, keep the city’s wheel tax and debt finance 25% of transportation costs.
- Create a transportation utility fee, eliminate the wheel tax and use no debt financing.
- Create a transportation utility fee, eliminate the wheel tax and debt finance 25% of costs.
Thursday’s presentation focused on the financial impact to residential property owners for each option.
A transportation utility would place more of the financial burden for roads on commercial properties, which some officials said is fair because those properties draw more traffic and therefore require more road usage.
Council members ruled out option one. Several members said they don’t think they should implement a transportation utility while keeping the city’s $20-per-vehicle wheel tax.
Option two would be the most expensive for residential property owners off the bat, but increases would get smaller over time. In 10 years, the second option would be the least expensive for residential taxpayers, according to the analysis.
Option three would start out slightly more expensive than the status quo, but over time it would be more expensive than the second option.
Here are the estimated annual fees residential taxpayers would pay for the combined road charges (utility fees, wheel taxes and property taxes, when applicable):
- $78 in 2022, increasing to $185 by 2032.
- $80 in 2022, increasing to $140 by 2032.
- $54 in 2022, increasing to $162 by 2032.
- Less than $50 in 2022, increasing to $217 by 2032.
Council members asked Gagin to prepare a model showing the cost to residential taxpayers if the city took a hybrid approach: starting off in 2022 with a utility fee and debt payment then slowly weaning off the debt payments over five years until there is no debt financing for roads.
Members also re- quested cost scenarios for other types of properties.
Council member Doug Marklein said he has concerns about the higher financial burden for business owners, many of whom have struggled during the pandemic.
That could lead to businesses failing or having to raise their prices, Marklein said.
Council member Paul Benson voiced support for shifting the burden to commercial properties, particularly big-box retailers, many of which have challenged their property assessments and caused the city to miss out on tax revenue.
Council member Susan Johnson raised concerns about charging residential properties the same usage rate despite some groups—largely the elderly—using the roads less frequently.
City Attorney Wald Klimczyk said creating a utility is legally sound, but applying the utility differently for protected demographic groups could get the city in legal trouble.