By Dr. Rent
From time to time on certain posts, we have flirted with the topic of user fees. Basically, city government has two ways that they can charge for the services that they provide. The first way is the general tax levy. The city figures out how much money it needs to operate, then figures out how much taxable property there is, and creates a general tax levy sufficient to cover costs. The second way is to charge those people who use a specific service to pay for that service. The most well-known service fee would probably be your water bill. You don’t pay for water through property taxes, you are sent a separate bill and pay for only that which you use.
In times very high property tax rates and a new freeze on tax levies passed by the legislature, the act of moving more and more items off of the tax role and converting them to user fees becomes more attractive.
The basic logic in favor of user fees is that property taxes are based on the value of taxable property. The proportions of certain services don’t match well with dividing up the cost this way, and many entities (such as churches and non-profits) do not pay property taxes and therefore do not pay at all for services that they use.
The argument against is based on two things. The most prevalent problem people have is that property taxes are income tax deductible (if you itemize), user fees are not. Therefore, each budget item converted to a user fee is one more item you cannot deduct from income taxes. Secondly, more people would probably be in favor of user fees if they saw their property tax bill drop because that fee was taken off of it. I have yet to see that happen. So people believe they are being billed twice, they pay a new fee (a tax) and taxes stayed the same or even went up. These are very compelling arguments.
I am a fan of user fees, because I am a fan of people paying their fair share. When Weston established its storm water utility, a new user fee was added to the water bill; and water bills were now sent to properties served by wells. If you have a well in Weston, you get a bill for just under $9 every three months to help pay for storm water management.
How much you are billed depends on how much your property adds to the storm water management facilities. For example, an undeveloped lot doesn’t have that much impact, so no storm water bill. The run-off on a single family home isn’t that bad either, hence the $9 per quarter bill. But if you have a parking lot the size of 50 average single family home sites, you should have to pay 50 times as much. And that is how it works. Churches and schools which contribute zero to property taxes have some of the largest parking lots. By making this a user fee, they now pay their fair share.
What if you live on the river and your lot is designed to drain to the river and not the storm water system. There are credits in the system to lower your bill for that, as there are if you have on site detention that exceeds state standards.
Taxes did not go down when storm water was taken off of the general tax levy in Weston. However, taxes did not go up drastically either. The reason this utility was created was that the State passed what is called an unfunded mandate. The entire Wausau area has new storm water guidelines to follow, very very expensive ones. This was going to add hundreds of thousands of dollars to the tax levy to pay for. Instead of adding it to the tax levy, they added it as a fee instead.
From time to time, there are a number of proposals to turn tax levy items into user fees. Before you start shouting about how unfair it is, that this is just another way for the government to nickel and dime you; do a little bit of research. Ask these questions:
- Am I paying more than my fair share for this service?
- Are tax exempt entities big users of this service and not paying for it?
- Is the new way of charging the fee seem fair?
- What will this cost on my taxes if it is not a user fee?
- Do I itemize my income taxes?
- How much does $100 off the property tax bill save me on income taxes?
So far, every service that has been changed to a user fee has made sense to me with the exception of fire hydrant rental (that one still escapes me). Just, the next time you hear a user fee proposed, give it half a chance before assuming it’s a bad thing.