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Council set to start sewer franchise fee to fund road work

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Pierce County’s Chambers Creek Regional Wastewater Treatment plant manages sewage from around the region and could now be charged a franchise fee for using city streets for its web of pipelines. The fee could generate about $360,000 a year. The Chambers Creek facility currently provides wastewater management, collection and treatment services to about 252,000 customers around Pierce County, averaging 19 million gallons of wastewater daily.

After a study session on May 2, the University Place City Council stepped closer to charging a 6 percent fee on sewer services.

The proposed franchise agreement with Pierce County would require Pierce County’s Sewer Division to pay University Place a 6 percent franchise fee for the utility’s use of the local streets and other properties. Sewer services are the only utility to not be charged a franchise fee and the rate is identical to what Lakewood charges the county. Power, water, gas, telephone and cable television utilities have been charged franchise fees for years.

The franchise agreement, which would have to be formally approved by the City Council as well as the Pierce County Council, would generate about $360,000. If the fee is passed on to residents, the added charge would come to about $3 a month. But Pierce County doesn’t have to pass that fee increase on to its sewer customers in UP, however, since its sewer rate in Lakewood is the same as UP despite Lakewood charging a franchise fee.

“We are taxing the utility,” Councilmember Kent Keel said. “They don’t have to pass it on.”

Work to begin collecting a franchise fee on sewer services, which affects about 80 percent of city residents, started at a council study session last year that largely dealt with ways to address the city’s $1 million budget shortfall. The city has already announced plans to end parks programs in an effort to save about $400,000. An effort to form a metropolitan parks district to take over parks programs falled at the ballot box last month by a two-to-one margin.

The parks cuts now leave about $600,000 left to cut for the 2017 budget when those talks formally start in the fall. The franchise fee could lower the projected gap since state law allows cities to put the new revenue into their general fund.

The City Council directed staff to draft an ordinance requiring the franchise fee and that would earmark the revenue to be used for road repairs. The city spends about $300,000 a year from its general fund to shore up road repairs. If the council ends that draw from the general fund and replaces it with the money from the franchise fee for sewer service, the city’s deficit projection sits at about $300,000 after factoring in the already announced cuts to park services. Proposed changes to other fees could eliminate the city’s projected budget deficit.

“We are as close as we’ve been at any time in the past decade to righting the ship,” said City Manager Steve Sugg.

Councils have been struggling with revenues not covering expenses for about a decade, when the state ended sales tax equalization payments to small, mostly residential cities. UP had been receiving about $3 million a year through that program. Once it ended, the city developed its plans for the Town Center as a way to generate more sales tax within the city. Projects were that the commercial and civic hub would generate about $2 million. Its economic impacts are just now being felt with the commercial developments just now taking shape after the slow down caused by the Great Recession. The Town Center has since seen private development of luxury apartments and retail spaces, including the opening of Whole Foods.

Since 2010, the city has improved its finances by refinancing its long-term debts at lower rates and by making additional difficult staffing cuts. Those cuts include two police positions and, beginning in 2017, all four positions in the recreation department.

“Unlike many cities, we don’t rely on one-time revenues or rosy projections of future revenue to balance our budget,” City Council Finance Chair Caroline Belleci said.

While local property owners pay some of the highest tax rates in the region, only a small portion of that overall bill goes to the city, Finance Director Eric Faison points out. The owner of an average home in UP pays $5,300 in annual property taxes. Of that, the city receives just $390 that goes directly to police service funding. The rest is largely made up of $2,200 to University Place School District and $1,017 for West Pierce Fire and Rescue. Much of that is voter approved bonds and levies, while the city has unsuccessfully sought voter-approved tax increases twice, once for parks funding shortly after incorporation and recently to avoid cuts to police. The most recent measure to form a metropolitan parks district was driven by residents.

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