Mayor’s Message – Reasons for Increases to Taxes and Fees

4-22-19

REASONS FOR PROPERTY TAX AND WATER UTILITY FEE INCREASES

There is no one cause, but there are multiple reasons that the Mayor and Council are considering increases in the Town’s property tax rates and water utility rates. These can be summarized under three different topics.

SEWER SYSTEM UPGRADE DEBT RETIREMENT

CAPITAL PROJECTS

ECONOMIC DEVELOPMENT

First, let’s start with…

1) SEWER SYSTEM UPGRADE DEBT RETIREMENT

  • The Town of Berlin has an immediate need to create a customer sewer utility fee that provides a consistent, reliable way to:
    • Retire the debt on our wastewater treatment plant capacity investments and spray irrigation operational costs.
    • And to provide reliable funding for ongoing capital projects that are necessary for both growing service demands and ever increasing environmental requirements.
  • An annual fee to all 1950 sewer customers would ensure that there is a consistent and reliable source of revenue for the retirement of sewer utility debt and to fund ongoing capital projects.
  • For many years the Town has relied exclusively on new development to provide the funding to pay off outstanding wastewater utility debt that totaled $15 million as of June 30, 2018.
  • But, as residential and commercial development is at its very nature always cyclable, a more dependable source of revenue for wastewater that includes debt retirement and capital projects, is absolutely necessary.
  • The Town’s approach to significantly upgrade the capacity and quality of wastewater treatment over the past decade has relied on new development to offset the debt service and ongoing capital projects.
  • While much underserved demand has been met, there is a growing resistance in Berlin to continuing residential and commercial development at the pace the town has experienced since our economic recovery from the great recession of 2007-08.
  • Even with Berlin’s revitalized growth there is not enough revenue to retire the current sewer debt, or to fund other ongoing capital projects that are needed in a town with much old infrastructure.
  • This has required borrowing that when combined with much higher than projected spray irrigation operating costs, have caused most of the depletion of Berlin’s general fund reserves over the past five years.
  • To correct this problem the Town must take two steps. First, to raise the current water utility fees over the next five years to end any further reduction of general fund reserves.
  • The second step is that Town of Berlin must institute a permanent sewer customer utility fee charge to provide consistent funding for capital projects for the sewer utility. The Town needs to work with a financial expert to help us complete the analysis and implement the fee.
  • According to our engineering consultants this is a common practice in other communities with a sewer utility. This fee would be calculated annually and fluctuate based on the capital needs and the amount of EDUs (Equivalent Dwelling Unit) fees collected each year.

2) OTHER CAPITAL PROJECTS

  • The second largest capital project the Town has incurred in the past several years was the purchase of the property and building of a new police station. The $3.2 million project was long overdue and had been needed since before the start of this century.
  • Again, town general fund reserve funds were used to purchase the property, then construct and equip our new police facility on US 113. Town Slots revenues are being used to pay off this cost which is expected to be completed within eight to 10 years.
  • We have also received a request to increase the amount the Town budgets for capital expenditures for the Berlin Fire Company. An additional $300,000 is being requested for Fire, Rescue and Emergency Medical Services. This would bring the total from the current level of annual funding of $605,000 to $909,000 representing a 33 percent increase.

3) ECONOMIC DEVELOPMENT

  • The pushback from the Berlin business community is disappointing given the Town’s longstanding annual commitment of $330,000 for Economic and Community Development.
  • Berlin has successfully supported economic development within our town. Since upgrading our Economic and Community Development Department from one part-time position to two full-time town employees, the number of Downtown Berlin businesses has doubled to over 70 in the past 10 years.
  • The town’s support for businesses in Berlin includes:

— the purchase and operation of a Berlin Welcome Center on Main Street,

— sponsorship or support for 45 special events in downtown Berlin.

— plus the organization and promotion of the Berlin Farmer’s Market on Sundays from May through September.

— extensive multi-media messaging and advertising including continuous and highly effective online promotion and marketing of Berlin.

  • I would hope that businesses in Berlin consider the benefits of our town’s outreach and support that is significantly greater than most small towns throughout our region.
  • It is not feasible that the Berlin Chamber of Commerce could take on the financial responsibility of our town’s ongoing and successful economic development investments.

SUSTAINABILITY

  • One thing that all three of these investments have in common is to ensure the sustainability of Berlin amid rapidly changing circumstances.
  • These expenditures for sewer system upgrades, public safety of police, fire and EMS, and Economic Development coincide with rising public expectations to accelerate the upgrades of our streets and sidewalks and to speed-up mitigating flooding issues, which each represent multimillion dollars of expenses.
  • If there is a way to enact incremental tax and water utility fee increases over three to five years, that would not put our town’s financial position in jeopardy by further reducing the general fund reserve balance, then I know we would all gladly do that.
  • To implement property tax increases over three years, at 15% the first year, 10% the second year; and 5% the third year, or a total of 30% over three years…
  • The borrowing from the General Fund reserves would be at the following levels:

– $1,523,150 as of July 1, 2019

– $    290,960 as of July 1, 2020

$   Expect to break even as of July 1, 2021

  • This represents an additional $1,853,785 that would be borrowed from reserves this year and next, leaving a balance of only $1.8 million at the start of Fiscal Year 2022.
  • A reserve balance of $4.5 million equals about 1 year in town operational expenses and is the amount the Mayor and Council believe should be maintained over time.
  • Town’s reserve policy will be established later in FY 2020 to underline the appropriate reserve balance.
  • The irony is that spending from general fund reserves has not been, nor does it continue to be for frivolous purposes.
  • All the expenses represented by these investments are essential for both our current quality of life and to ensure that we remain a community that has as its underlying value, the need to adapt to change to meet new opportunities and challenges.

Mayor Gee Williams

Town of Berlin

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