Traverse City News and Events

City Tax Hike, Utility Rate Increases Could Fund Improvements

By Beth Milligan | May 15, 2018

Traverse City Manager Marty Colburn had a clear message for city commissioners Monday: The city has major infrastructure needs on the horizon, particularly street repairs, and the state is not coming to the rescue with funding – leaving the city on its own to pay for improvements by raising city taxes and utility rates.

Colburn and commissioners spent several hours talking through the city manager’s proposed 2018-19 budget Monday – a plan that calls for increasing the city’s millage rate to pay for street and sidewalk repairs, reinstating a property tax administration fee, and raising the city’s sewer and water rates. Colburn said the measures were necessary to cover a growing list of infrastructure repair projects in the city.

“We are not keeping up with some of our infrastructure costs…we need additional resources to meet the needs,” Colburn said. He said legislators had made it clear to staff that “we cannot depend on the state and the federal government to come fix us. That is the message that’s resoundingly clear.” Colburn gave as one example a recent $1 million ask Traverse City made to the state for assistance in reconstructing Eighth Street; the state instead approved only $112,000 for the project.

“The state is demonstrating to us, don’t count on us, don’t depend on us, and go out and utilize the resources that you have available to you,” Colburn said. “That’s a tough message.”

Noting that the city’s millage rate “is the largest revenue source that the city has,” Colburn asked commissioners to support increasing the millage rate by a full 1 mill starting in July, from 11.1167 to 12.1167. Because that increase is below the city’s authorized cap of 12.6967 mills, commissioners can raise the rate without having to seek voter approval. The increase would cost a city property owner with a home with a $100,000 taxable value $100 more per year in taxes (a $200,000 home would be a $200 increase, and so forth). The hike would generate an estimated $876,141 in additional revenue in its first year – monies Colburn said would be dedicated exclusively to city street and sidewalk repairs.

“One of the most notable shortcomings is our streets…we have some that are in very rough shape,” Colburn said. “It’s not just a want; this is a need.” Without a millage increase, the city manager said, “we’re just going to be scraping (funding) together from year to year. Whereas this will be a plan to put and dedicate (funds) toward your complete streets within the city of Traverse City.”

Several major water and sewer projects in the city – such as the repairing of a water reservoir on Barlow Street and construction of a new two million-gallon water reservoir, plus the city’s planned switch from analog meters to smart meters – also prompted staff recommendations to raise the water and sewer rates. According to a memo from City Treasurer Bill Twietmeyer, on the water front, the “average residential customer who uses approximately 1,200 cubic feet of water would see their monthly water charge increase from $21 to $24.80 if the rate change is approved.” Colburn added the city has not “increased the rates of the water for six years, which is a very long time.” The rate increase of .04 (4/100th of a cent) per gallon would generate approximately $365,000 annually.

On the sewer side, Twietmeyer proposed raising rates from $37 to $40 for the first 600 cubic feet of usage, and from $43 to $46 for each additional thousand cubic feet of usage. That would mark the second rate increase in the same amount of years, as the city also raised the sewer rate in 2017. “That increase, along with previous rate increases, were necessitated by the need to pay for the various capital improvement and maintenance projects both to the collection system and to the wastewater treatment plant,” Twietmeyer wrote. “This scenario has not changed with regard to the sewer fund… I anticipate that additional rate increases will be necessary both next year and in future years if the various maintenance projects at the plant and in the collection system must move forward.” The sewer rate increase would amount to roughly $390,000 annually.

Also included in Colburn’s budget is a recommendation to reinstate a property tax administration fee. The city in the past has charged one percent of the total tax bill for a property as an administration fee (ie, a $3,000 tax bill would have an additional $30 fee on top). Colburn previously told commissioners the city absorbs significant costs on behalf of other governing agencies in administering property taxes, and noted increased costs related to a rising number of tax tribunal cases mean the city was essentially doing “pro bono work” for those groups. The city’s policy says a property tax administration fee is automatically charged unless city commissioners adopt a resolution waiving it, which they have done for several years. Colburn asked the board to allow the fee to be charged this next year, which would raise over $400,000.

Because commissioners were in study session Monday, they did not vote to approve any of the budget proposals. A public hearing is set for next Monday (May 21) to gather public input on the budget; commissioners must then vote to adopt the budget by a June 4 deadline. Several commissioners Monday seemed willing to support staff’s recommendations for the coming fiscal year, though they acknowledged some of the measures would likely not be popular with residents.

“I’m not thrilled about raising rates…but our system is old and needs replacement,” said Commissioner Brian McGillivary, referencing the city’s aging underground pipes and water and sewer infrastructure. “It’s pay me now, or pay me later. I’m not thrilled by these increases, but I’m not surprised by them.”

Commissioner Richard Lewis agreed. “The sewer, when it breaks, people are going to go, ‘why didn’t you fix this?’” Lewis said. “Nobody wants to pay the rates, no one wants to pay the taxes, but if you don’t fix it, you’re going to pay. It’s just a matter of when…it’s a call we have to make. But I’d rather be moving forward in a proactive mode to make sure our utility system is in the best place (it can be).”

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