Monday, July 15, 2013
 
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Utility tax could fund new city safety complex and pension plans

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[July 15, 2013]  Last Tuesday evening, talk in Lincoln City Council chambers returned to the topic of implementing a utility tax. Aldermen continue to hash out whether or not this is a move they want to make.

While the council is currently somewhat split in their opinion of implementing this tax, most aldermen seem to be in agreement that if it is imposed, the funds should be designated to specific projects.

The tax was discussed at length recently as being a means to fund the construction of a modern city safety complex, which would include adequate space for both the city fire and police departments.

In addition, it has been mentioned that excess funds could go into the downtown revitalization projects. Bruce Carmitchel also voiced a desire to see some of the money go into the city's two pension plans for firefighters and police officers.

Last Tuesday evening, city administrator Sue McLaughlin showed the council another plan for designating utility tax revenues that included dollars invested in the pension plans.

In previous discussions, McLaughlin had used a 3 percent tax as the ideal for the city.

In this scenario, she kept 3 percent for the safety complex and downtown revitalization, but took an additional 1 percent to be designated for the pensions.

She explained to the council that even if the city does go to a 4 percent tax, it will still be charging Lincoln businesses and residents slightly less than Ameren's current rate for electricity.

When the city signed its agreement with Integrys as the official provider of electricity for the community, the rate they locked in was $0.03965 per kilowatt-hour.

This year Ameren requested and received from state officials the right to impose a tariff on its electricity. This was automatic statewide and raised the local rate to $0.04131 per kwh for people buying from companies other than Ameren.

With a 4 percent utility tax, the rate in Lincoln would go up to $0.04619 per kwh.

Currently customers who are buying their electricity from Ameren are being charged $0.0466 per kwh.

McLaughlin said if the city would choose to go with the 4 percent rate, the top 3 percent would total $1,000,704 in revenues for the city. This is based on the tax being applied to both electricity and gas service. That 3 percent would go toward making annual bond payments for the new safety complex, as well as annual bond payments for downtown projects.

The 1 percent would be designated to the pensions and would be divided between the police and fire plans in appropriate proportions.

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It was brought to light that if the city went this direction for fiscal 2014, they could meet and exceed the recommended contribution rates in both of the pension plans.

Currently, the city is raising enough revenue in a year to pay only 53.8 percent of the annual contribution for police and only 42.2 percent of the contribution for the firefighters. This has been the case for the last several years. The money to balance the revenue to the expense for the city has been drawn from the police and fire investment funds.

Tom O'Donohue said he would not be in favor contributing more than the state's recommended amount. Mayor Keith Snyder asked if the recommended amount was a static figure and was told that it is not.

McLaughlin said that if the city does do the recommended amount from now on, the pension funds should be 90 percent funded by the year 2040.

O'Donohue commented on that, saying, "Not only will we not be here then, but we have no idea what the state will do by then."

Melody Anderson said she would like to see the city be able to contribute at least the recommended amount. She added that the city has tried to throw bits and pieces of various revenues at the pension fund, but this hasn't made much of a dent in it. She said she sees no way the city can meet the recommended amount with the way they are funding the pensions now.

Moving away from the pensions, Jeff Hoinacki asked about a $2 million bond proposed for downtown improvements. The bond, which simply put would be a loan using the utility tax as collateral, would be paid for over a 10-year period. Hoinacki asked what would happen to that cash once the bond was paid: Where would the money be spent then?

McLaughlin said that would be up to the city. She said the city could put a sunset provision in the utility tax and revisit it at the end of its term. Then they could keep the money and invest it further in the downtown, designate it to something else or reduce the tax.

After McLaughlin answered that question, discussion on the topic died down, and the mayor moved on to the next item on the agenda.

The utility tax is still in discussion stages, and there has been no indication as to when or if there will be a motion to implement the tax.

[By NILA SMITH]

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