Scottville to Add New Tax Without Voter Approval?

[XLFD]

The Mason County Press reported Monday 9-22-2014:   

SCOTTVILLE — Scottville property owners who shut off their water will have to continue to pay a monthly fee for the service if the city commission passes a resolution being recommended from the infrastructure committee.

City Manager Amy Williams said she attended a seminar earlier this year and found out that most communities charge a readiness to serve fee for water and sewer whether or not the water is turned off at a residence/business.

Currently, Scottville only charges the fee for water and sewer that is turned on.

“In the event they have a vacant building or go away for the winter and the water is turned off we haven’t been charging the readiness to serve fees, which are $35.86 per month,” Williams said. “The readiness to serve fees are really intended to pay towards any current or future debt on the systems, so in our case those residents with water turned off are not paying their share of the debt.  Like most communities our bills are figured on two items, readiness to serve fees and water consumption.

“Our sewer fund has a significant amount of debt and our water fund will soon have debt of its own.  Depending on the time of the year we can have 30 or more buildings with their water shut off, this equates to a loss of at least $13,000 per year for us (water & sewer combined).

Scottville thus was going from a system where a person who had the water shut off to a residence (temporarily for example for those who may winter elsewhere, and permanently if the house was effectively vacant year round) paying nothing for water and sewer and going to a new system that would have you pay $35.86 per month (or around $425 a year) even if you do not use the sewer or water system or are disconnected from it. 

Back in 1998, the Michigan Supreme Court made a landmark decision in Bolt v. City of Lansing that distinguished between what are "user fees" and "taxes", we have looked at this before around three years back in the thread  TLT: Fee or Tax?  In the decision, the court provided a three prong test to determine whether a charge the government makes is a user fee or a tax.

Traditionally, "readiness to serve" charges have been deemed as user fees, the charge incorporating a maintenance cost for the system that strict user fees could not cover.  Further precedent establish that's the case when the RTS charge generates revenue in an amount proportional to the cost of the services rendered, and do not generate any tax-like benefit on behalf of the general public, Wheeler v Shelby Charter Twp (2005).  It is argued that RTS charges are needed when the amount of water and sewer usage revenues are smaller than the minimal amount to maintain the system.

But here, the thirty or so residencies that either temporarily or seasonally shut their water off are now hit with possibly over $400 per year, but have no added benefit.  The City Manager has said that this is effectively a policy mistake that they haven't charged this 'fee' in the past to these water & sewer deadbeats.  To change the policy at this date by the city commission would, in my opinion when you apply the three pronged test, show that this is definitely not a user fee but a new tax exacted on those people who do not use the system, except potentially (as they were before). 

Therefore, by the Headlee Amendment, the city commission cannot decide to charge these residency owners unless the people of Scottville okay that levy with a popular vote.  And since the people that own such properties are in a small minority, many of them probably living elsewhere, there is a good chance that the vote would do exactly what the Scottville City Commission did, and raise the taxes on these select properties.

Do you think this is a user fee or tax, and how would you vote if you lived in Scottville?

[Polaris]

Most companies that supply utilities have some sort of fee like this, it's unfortunate and I don't like it but it seems to just be the way it is. There is a fuzzy line between the water department operating as a public entity requiring the public to vote on changes and it needing to operate as a business where it could change and add fee's at will. Naturally I would vote no on this if it came up for a vote in the city here, but if the fee for every city service came up for a vote then most people would probably vote "no", and the city wouldn't be able to sustain itself.

For example the natural gas bill has a nominal "consumer fee" even though I haven't used any service from them in the summer months. 

[XLFD]

Just in case you may have oversimplified my point, I agree that a (private or) public utility may impose a set fee per month if otherwise they would be operating in the red, and recent decisions regarding RTS charges as fees would seem to allow that in most cases.  In Scottville's instance, however, they have until now allowed those who do not use the water and sewer system (and may not have ever used the system, but are just situated in the 'wrong' place) to not pay that fee. 

The point being is now that the City of Scottville has found they need to generate more money, they have decided to close this loophole, and so the new imposition is obviously not a user-fee (it is actually a non-user fee where those who don't use the service are 'taxed') so the only thing left is that it's a tax, and it appears to be being levied unfairly. 

[Willy]

I can't stand the added fees that burden consumers. I have some hunting land a few counties to the east and I pay many times more in RTS fees than I do for the electricity I use. I figured that I could and should have purchased a generator and that I've paid many times over for a generator so I'm going to disconnect and purchase one, then the utility company can send the volts and amps I don't use up their a_ses. 

[AQUAMAN]

Well said Willy and X. No one that doesn't use a utility while it's on vacation or disconnected, should be imposed with a RTS fee, (disguised term to steal lawfully). That's what I think it is, a legal excuse to steal from the public. These utilities, both public and private, need to tighten their budgets, re-evaluate their operations to the situations as they change, and stop wasting money they daily pay to many employees that don't really do much anyhow. Their executives are probably overpaid too, no doubt, and don't want any changes in their pay, just increases. The entire episode rings of deceit and fraud imho. These corps./towns have HUGE PROFITS now, and won't be hurt in the least by such incidents. Sustaining future services for a paltry percentage of the whole in lost accounts isn't the end of the world by any means. Crybabies is all I see, not mature adults willing to make adjustments as necessary. What's next? Getting a bill for gasoline because you have an electric car or moped and don't purchase what you did in the past? Or maybe a gas bill because you changed over to a wood/pellet heating system? Or how about a grocery bill because you are now a vegetarian and grow most of your own food? Makes the same sense as having this to deal with imho.