Piedmont Civic Association – Piedmont, California » New Sewer Tax Surcharge: Arguments For and Against

Dec 19 2011

New Sewer Tax Surcharge: Arguments For and Against

Surcharge Would Raise Sewer Tax 50 percent –

A proposed Measure A tax surcharge will raise Piedmont residents’ total annual sewer tax from a range of $471 – $849 up to a range of $707 – $1,274, depending on residential lot size. (See chart below.)

The official voter guide arguments for and against Measure A are shown below. The “pro” argument states that additional funds are needed to maintain, monitor, and complete the rehabilitation of the City’s sewer system. It notes passage of the surcharge was unanimously recommended by the Municipal Tax Review Committee. The “con” argument states that the surcharge is unnecessary because it merely speeds up completion of sewer rehabilitation (to 2018 rather than 2023) and the city can comply with EPA requirements with existing sewer revenues. It further asserts that the sewer parcel tax is not tax deductible.

An analysis of the ordinance by the Piedmont City Attorney and a link to the full text is also provided. The tax includes an escalator based on the CPI. Unlike the City parcel tax which is limited to a 4% increase per year, there is no limit to the sewer CPI increase.

All registered voters in Piedmont will receive this information in their voter guide. Absentee voting begins on January 9, 2012. The election is on February 7. A two-thirds vote is needed for the measure to pass.

LINKS to Related Articles:

Sewer Surcharge – and other Piedmont Parcel Taxes – Not Tax Deductible?
EPA Cost Projections Come Down
Piedmont Sewer Fund Runs Short of Money – Why Are There Deficits?

ARGUMENT FOR MEASURE A

In 2000, Piedmont residents approved a tax which has funded the maintenance, operation, and upgrade of our sewer system. In fact, Piedmont has been improving its aging sewer system for nearly two decades, a project now 60% complete.

Since 2000 the regulatory requirements on the City have increased, culminating with a 2011 EPA Order requiring additional rehabilitation, reporting and monitoring of the sewer system. After examining these requirements and Piedmont’s ability to pay for them, the Municipal Tax Review Committee (MTRC), an independent committee of Piedmont residents, unanimously recommended a temporary, ten-year, 50% increase to the sewer tax.

The MTRC reported : “Based on a thorough analysis of the ongoing requirements to renovate and upgrade the City’s sewer system, maintain current services and comply with court orders and regulatory requirements, the MTRC recommends that the Sewer Tax be assessed in a manner outlined in this report… MTRC recognizes that this recommendation will represent a fifty percent increase (50%) of the Sewer Tax currently levied. This increase (“Surtax”) is necessary to meet legal and regulatory obligations that the City must satisfy. . . The MTRC recommends that the Sewer Project be continued to ensure that the City satisfies all legal and regulatory obligations. Failure to comply will prove more costly than a well-planned effort to continue to improve the City’s sewer system – a project that is well under way.”

A vote for Measure A is a vote to fulfill Piedmont’s legal and ethical responsibilities to maintain a clean and healthy San Francisco Bay region. By continuing Piedmont’s impressive record of improvement to our sewer system a vote in favor of Measure A is also a vote that makes economic sense and ultimately will save money for Piedmont and its residents.

Please Vote Yes on Measure A.

Dean Barbieri, Mayor – John Chaing, Vice Mayor -Valerie Matzger, Former Mayor – Michael Rancer, Chair Municipal Tax Review Committee – Bob McBain, Member Municipal Tax Review Committee

ARGUMENT AGAINST MEASURE A

Since 1995 Piedmont has replaced 60% of its sewer system. Continuing at the current pace will complete the work by 2023. The Municipal Tax Review Committee plan will advance completion to 2018, well ahead of most East Bay cities. The City is also implementing a new monitoring program as required by Stipulated Orders. By rejecting this 50% increase and using the current sewer tax, the required monitoring programs can be implemented. Piedmont property values are a result of well maintained infrastructures, excellent safety services, outstanding schools and plentiful recreational facilities. Piedmonters value and wish to protect the environment; it is unnecessary to rush sewer system replacement.

The EPA requires testing of new sewer mains and your sewer lateral. The lateral testing is triggered at sale and remodels, plus there are other ongoing monitoring programs that detect residential lateral leaks. If your lateral fails the tests, and many will, the required replacement cost amounts to an indirect tax to homeowners starting at $3000.

Later this year we will be asked to renew both the Municipal Services and School Parcel Taxes. We have some of the highest property taxes in the state, and unquestionably the highest School Tax. Yet generous residents continue to donate significantly to our excellent schools. The important school donations will diminish if family budgets are further burdened by this 50% sewer tax increase. Ultimately this tax increase may shift needed donations from education to sewers.

Piedmonters can continue to honor the environment and maintain a prudent financial balance for the various needs that keep Piedmont great. Continuing the sewer rehabilitation program at a moderate pace will allow additional funding for education, and be a good balance for those on a fixed income. Vote no on this initiative and send a check to the Annual Giving Campaign instead.

Rick Schiller Piedmont Voter

REBUTTAL TO ARGUMENT OPPOSED TO MEASURE A

THE CHOICE IS CLEAR: THE CITY OF PIEDMONT MUST COMPLY WITH THE 2011 EPA ORDER REQUIRING ADDITIONAL REHABILITATION, REPORTING AND MONITORING OF THE CITY’S SEWER SYSTEM, AND THE PROPOSED SPECIAL MUNICIPAL SEWER TAX (“SURTAX”) IS NECESSARY TO MEET LEGAL AND REGULATORY OBLIGATIONS THAT THE CITY MUST SATISFY.

The current sewer tax raises only $2.12 million per year; not enough to cover obligatory debt service (nearly $700,000 per year for the next eleven years), ongoing maintenance (approximately $1.4 million annually), and EPA requirements ($961,000 this year).

There are three remaining phases (Phases V, VI and VII) to complete the rehabilitation of the remaining 40% of the City’s aging sewer system. Without the temporary, ten-year, 50% increase to the sewer tax, the completion of the remaining phases is not possible. The completion of the remaining phases is critical to meeting the requirements of the 2011 EPA stipulated order.

Unless we want to stop maintaining our sewer system, or go into default on our existing loans, or risk violating the EPA stipulated order, we have very little choice except to approve the temporary increase to the sewer tax. The cost of noncompliance could be severe. And if we do not act now, the low cost State funding we’ve enjoyed may no longer be available. Additionally, most Piedmont residents would prefer to move rapidly towards stopping Piedmont’s contribution to the pollution of the San Francisco Bay.

In conclusion, fiscal prudence and environmental concerns make it essential that we approve Measure A.

Dean Barbieri, Mayor John Chiang, Vice Mayor Valerie Matzger, Former Mayor Bob McBain, Member, Municipal Tax Review Committee

REPLY TO REBUTTAL ARGUMENT

This tax increase is not necessary to meet our legal and ethical obligations. Piedmont is in full compliance and not subject to any EPA penalties. The EPA is requiring a sewer replacement/monitoring schedule of East Bay cities that Piedmont is already well ahead of. The final Administrative Plan will only require Piedmont to have a ten year plan to continue its sewer rehabilitation and implement new monitoring. The EPA is not requiring accelerated mainline replacement. All present and future EPA requirements can be accomplished with the existing sewer tax.

The City of Oakland is the only City in the region cited by EPA for compliance failure. Oakland and Piedmont sewers are interconnected. Oakland’s (population 390,724) inability to comply means Piedmont’s (population 10,667) exemplary compliance efforts have had negligible consequence towards cleaning up the Bay.
This 50% increase is for 10 years. Your total sewer tax will be $708 to $1275 with annual CPI adjustments. Residents can put those funds to better use. Starting in 2012 parcel taxes will no longer be deductible including the Sewer, City Services and School taxes. Piedmonters are now required to test their sewer laterals at time of sale or remodel with likelihood of replacement at significant cost. In total this is an increasing financial burden to residents. The 50% sewer tax increase brought on by the accelerated sewer replacement is a significant and unnecessary expense.

Reject Measure A. Use the money for home sewer lateral replacement and TO SUPPORT THE SCHOOLS.

Rick Schiller, Piedmont Resident

CITY ATTORNEY’S IMPARTIAL ANALYSIS OF MEASURE A

The proposed sewer surtax would secure a ten-year stream of additional revenue to meet requirements imposed on the City of Piedmont under Orders of the United States Environmental Protection Agency (EPA) and the California Regional Water Quality Control Board (RWQCB), as well as to undertake significant new tasks for the maintenance and rehabilitation of the City’s sewer system. Surtax revenue would be deposited into the City’s Municipal Sewer Tax Fund, and, in accordance with existing law, could be used in either of the City’s sanitary sewer or storm sewer systems.

Wastewater generated within the City is collected in approximately 50 miles of sanitary sewer pipelines. Since 1995, the City has undertaken a succession of construction projects to rehabilitate its sewer infrastructure, and as of the second quarter of 2011, had completed work on 14 of 23 sub-basins and almost 60% of the system’s piping.

In 2000, the voters adopted a municipal sewer tax to pay for the maintenance, construction, repair and operation of all sewer facilities and appurtenances in the City. Although revenue from the sewer tax has enabled the City to accomplish much of the work described above, the City requires additional revenue to complete work on the remaining 9 sub-basins and meet new stringent obligations under the EPA and RWQCB Orders, with the goal of achieving a fully rehabilitated sanitary sewer system within the next 8-10 years.

The proposed surtax represents an approximately fifty percent increase over the City’s 2011/12 sewer tax, as shown in the schedule below.

If passed, the measure would authorize the Council to levy the sewer surtax annually for a period up ten years, after which the surtax would expire. The surtax rate schedule described above could be adjusted annually to account for increases or decreases to the Consumer Price Index (CPI).

Prior to levying the special surtax each year, the City Council would be required to hold a noticed public hearing. After hearing from the public, the Council could impose a surtax in any amount up to the maximum limits described above, adjusted for CPI, or none at all, as necessary to meet the requirements of the EPA and RWQCB and the City’s own Sewer System Management Plan.

The sewer surtax ordinance was unanimously recommended to the City Council by the 2011 Municipal Tax Review Committee and placed on the ballot by a unanimous vote of the City Council on October 3, 2011. This ordinance requires a two-thirds vote of the voters to become effective.

Thomas R. Curry City Attorney