Fiscal Note
Under State Public Service Commission regulations, a municipality may assess an annual Payment in Lieu of Taxes (PILOT) payment on its municipal Water Utility. The State regulations provide that a municipality may assess a PILOT that is derived from an assessment of the Utility's physical plant value multiplied by the combined property tax mill rates of the City, the School District, and the Technical College. This PILOT calculation and assessment has been utilized by the City for many years.
Since the year 2000, the Water Utility PILOT has ranged from approximately 13% of its total annual operating expense budget to a high of 16.8% (the current, 2014 ratio). Various factors may affect the Water Utility's physical plant values and the taxing rates of the several jurisdictions. Over the past few years, a combination of the Utility's increased investment in its physical plant (including an intensified water main replacement schedule and new well construction and filtering) and increases in tax rates to coincide with a declining property tax base have resulted in increased PILOT payments, as per the State/PSC prescribed PILOT formulation.
As with all PILOTs, a Payment In Lieu of Taxes recognizes that the City bears costs such as Police and Fire protection even for properties that might be exempt from the property tax, and a PILOT is a proxy mechanism that mutually recognizes and acknowledges such costs. Revenues derived from PILOTs, including the Water Utility PILOT, are credited to the City's General Fund to support general City operations.
If the Water Utility PILOT were capped at 15% of its gross revenues, as proposed in the Resolution, the Water Utility PILOT payment in 2013 (for which the last complete data are available) would have been about $4.338M instead of its actual payment of $5.581M, or a reduction in City General Fund revenues of approximately $1.243M (please see attached spreadsheet for more data). As such, an additional $1.243M ...
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