 For the alderman, it is a move that none of them really appears to
want to make, but they have come to a conclusion that it is
something that may very well be necessary for the city to move
forward with plans for the future.If the tax is implemented, a
large chunk of it will be dedicated to the construction of a new
city safety complex that would provide ample space for both the city
fire department and the police department.
City administrator Sue McLaughlin introduced the topic Tuesday
night, sharing information she had put together based on information
received from Ameren Illinois about current utility usage in the
city of Lincoln.
She outlined the revenues that could be produced if the city
imposed a 5 percent tax, a 3 percent tax or a 1 percent tax on both
gas and electricity use. Later in the meeting she would tell the
council that the city can impose different tax rates on gas and
electric. For example taxing gas on the Ameren bill at 5 percent and
electricity at only 3 percent is one of several options.
How the tax could be used
Based on figures provided by Ameren, the city could earn
$1,667,839 per year with a 5 percent tax on both gas and electric.
It could earn a total of $1,000,704 annually with a 3 percent tax
and $333,537 with a 1 percent tax.
If the city were to approve the tax, the money would be earmarked
first for the safety complex. The tax would be used as the
collateral for a bond issue that would ultimately allow the city to
build the building, then make payments on it over the next 20, 25 or
30 years.
McLaughlin offered information on what it would cost in bond
payments to build a $14 million building, a $12 million building or
a $10 million building. Those costs ranged from $578,300 per year
for a $10 million building with a 30-year bond to $1,030,190 per
year on a $14 million building with a 20-year bond.
She also showed the council how much tax revenue could be left
over each year after the bond payment. In her examples the city
would have money left over on a 5 percent and 3 percent tax, but on
a 1 percent tax it would actually go in the hole on even the least
expensive facility.
Excess cash from the bonds ranged from $29,486 per year with the
lowest tax and the highest priced facility, to $932,019 with the
higher tax and lowest priced facility, all based on issuing a
20-year bond.
The excess cash after the bond payment could also be earmarked
for special projects in the city, such as the downtown
revitalization projects.
How this will affect the consumer
Before the city of Lincoln negotiated an electric aggregation for
local businesses and residents, consumers were paying 0.06130 cents
per kilowatt-hour to Ameren for electricity.
After the aggregation, consumers who chose Integrys as their
electricity supplier saw their electric rate drop to 0.03965 cents
per kwh, a significant savings for many consumers.
On June 1, Ameren imposed an electricity tariff on its customers.
Mark Pruitt of Illinois Community Choice Aggregation Network, the
city's adviser on aggregation, had told the city this could happen.
Ameren imposed the tariff statewide, not just in Lincoln. When
this was discussed in council chambers recently, Mayor Keith Snyder
told the council that in talking to Steve Smith of Farnsworth Group,
Smith had said even with the tariff, the city of Lincoln still had
one of the lowest electricity rates in the state.
Ameren's tariff increased the overall rate for electricity to
0.04131 cents per kwh.
If the city would choose to implement a 3 percent tax on
electricity, the overall rate would increase to 0.04497 cents per
kwh, which is still less than Ameren's current electric rate of
0.0466. So, consumers would still see savings with Integrys over
staying with Ameren for their electricity.
Council discusses the merits of a utility tax
During her presentation McLaughlin said that research she had
done indicated that the cost per square foot for a new complex would
run about $250. She reminded the council that the city has already
done a space use analysis on a complex. Based on the needs of the
city, she estimated the investment the city needed to make would be
at least $10 million to $12 million.
She also indicated that the estimated bond payment and excess
cash was based on current interest rates for the bond.
Bruce Carmitchel issued the first question during discussion,
asking how quickly the project could begin. He noted that interest
rates are on the rise, and he believed that 4 percent interest was
not going to last long.
McLaughlin said that with the space analysis study already done,
the biggest hurdle would be selecting and acquiring property for the
complex. She estimated that construction could start within the next
18 to 24 months.
She said there are already areas that are being investigated for
a site, but nothing has been done there yet.
[to top of second column] |
Snyder reinforced that, saying that the city has no site selected
yet, but the space-needs analysis is a big part of getting to the
end result. He also told the council that currently, the space the
police department occupies in the Logan County Safety Complex is
only about 1,600 square feet. According to the architect who did the
study, the department needs approximately 9,500 square feet.
Likewise, the fire department currently uses 8,400 square feet, but
the real need is more in the range of 24,000 square feet.
Snyder said that in the fire department, there are not only space
issues but also architectural issues. He noted the age of the fire
station as being a concern and also the fact that there is a
basement under the truck bays, which is a big concern.
In looking at where to build, he told the council that recent
discussions included an idea to build onto the current station,
expanding the facility into the vacant lot directly east of the
current building and possibly even into the green space on the south
side of the Logan County Safety Complex.
Marty Neitzel asked about the full 5 percent tax, saying that if
the city chose that, then the rate would go over Ameren's current
rate.
McLaughlin said it would.
Carmitchel wondered if this type of tax would be a hindrance to
attracting new business to Lincoln.
Snyder said that in comparing the proposed rate increases with
what is already established in other communities; Lincoln would
still be in line competitively. He noted that Lincoln's electric
rate would be above what is charged in Bloomington and Decatur but
below Peoria and Canton. He noted that the cost of doing business
everywhere is going to be going up; it's just part of it.
Chuck Conzo, city treasurer, said that he had said during the
budget-building process and would say again, it is not a good time
to be increasing taxes. He noted that recent speeches made by
President Barrack Obama indicated that utility rates were going to
be going up.
He said that right now Illinois on the whole is an expensive
place to live and conduct business, but Lincoln is not as expensive
a location as many others in the state.
Snyder asked Conzo if he had any suggestions on another way to
raise money for the city. Conzo responded that he did have some
ideas, and Snyder asked that he put those in writing, saying, "We
are open to any suggestions."
Tom O'Donohue said he was not opposed to the tax per se. He said
he liked the idea that the money would be earmarked for a specific
goal. He said he was concerned that everyone's utilities would go
up. However, he said the city cannot raise other taxes, and things
still need to be done that the city doesn't have money for. He said
he'd love to hear other suggestions, if there are any.
Melody Anderson reminded the council that the city is a
"tax-capped" municipality that cannot get any more than it is
getting from the current taxes.
The problem at hand is that with the current funding and the
increases in contractual obligations, Anderson said the money the
city has on hand to do other projects gets smaller and smaller each
year.
"I think we seriously have to consider an opportunity like this
that we have," Anderson said. "I'm not saying go with the 5 percent,
but we have things that have to be done and there is no money."
She added that with the utility tax, she also liked the idea of
the tax based on consumption. Those who use more will pay more. In
discussing this, it was estimated that on a $200 monthly utility
bill and a 3 percent tax, consumers would see a $6 increase in their
bill.
Carmitchel said he felt that was a small amount. He also
commented that if the city were to do this, he'd like to see the 5
percent tax. He noted that in addition to the safety complex and
downtown revitalization, he also has a concern for the funding level
of the city's police and fire pensions. He said he'd like to see the
city get those funds built back up so as to honor its commitments to
its employees.
Snyder commented that the city isn't really the one who made
those promises and commitments to city employees.
"We are responsible for paying them, but the promises were made
by people in Springfield," he said. "They set the benefits, but we
have to pay them."
Fire Chief Mark Miller said that in his time as chief, a
long-range goal has always been to come up with a new fire station.
He told the council the city has applied for grants for a new
facility but has not been successful in getting them. He said one
big stumbling block in the grant application is that the city
doesn't have the cash to purchase property on its own.
Miller said he, too, would hate to see another tax implemented,
but "if we're going to get out of our 125-year-old fire station,
this is a light that draws me."
Soon after this, discussions moved on to other topics. Later in
the evening the council agreed this matter was not yet ready for a
vote, and it was not placed on the voting agenda for next week.
[By NILA SMITH] |
