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Council ponders utility fees vs. property taxes to fund services

Grand Forks city leaders are again mulling a plan where, instead of raising property taxes, they use more utility fees to fund services other than utilities.

Grand Forks city leaders are again mulling a plan where, instead of raising property taxes, they use more utility fees to fund services other than utilities.

"That's a policy discussion whose time has come," said City Council member Doug Christensen, who's been a longtime champion of the plan.

An equally longtime opponent, Council Vice President Eliot Glassheim, expressed his skepticism. "I feel it's only to make people think we're not spending General Fund money, but it's coming out of utility rates from the same payers."

The General Fund uses property taxes to pay for core services such as police and fire protection. Utility rates pay for water and sewage treatment, storm sewers, flood protection and garbage hauling.

The issue came up during a budget work session Monday.

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In fact, the city has been transferring money from utilities to the General Fund for years. This year, it expects to transfer $3.2 million or about 12.3 percent of utility fees. State law allows transfers of as much as 15 percent and there are some proposals about Grand Forks taking advantage of that.

That amount is based on a calculation of what the utilities would pay in property taxes if they were privately owned -- $610,000 a year -- and how much in services they get from other city departments, such as human resources or information technology -- $2.5 million.

"This is not a figure that's pulled out of the air for percentages," Glassheim said. "It's rationalized. The 3 or 4 percent, or whatever it is, is not rationalized. It's a number we pulled out to avoid the appearance of raising property taxes."

He objects to it because, he said, he feels the burden will fall hardest on lower income people.

Unlike property taxes, utility fees tend to be regressive, meaning that, as a percentage of a person's income, it tends to be higher for a poor person than a wealthy person.

Christensen questions that assumption. Transfers need not result in higher utility fees, he said. While many renters pay utility fees, he figures, they're not necessarily dealing with rising property taxes that their landlords are paying, and in some cases, struggling to pay.

"We can drill down and see how this affects people but we can't assume that by doing this we're shifting utility fees to lower income people," he said.

Public Works Director Todd Feland told the Herald that, in the long run, he thinks transfers would eventually lead to fee increases. "It's just how you take the money," he concluded.

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If he's right, the transfers would have an effect that went unmentioned by the council: They'd result in more revenues to city coffers from entities that pay utility fees but not property taxes, such as the university, churches and nonprofit groups.

Reach Tran at (701) 780-1248; (800) 477-6572, ext. 248; or send e-mail to ttran@gfherald.com .

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