Tag Archives: sewer

More on Arnold Taxes

7 Sep

In May, the Arnold City Council snuck in a 5% gross receipts tax on sewer bills in the wake of the sale of the system to American Water (perhaps illegally, as I reported here). Since this was done without any kind of advance notice, Arnold residents were likely surprised to see this on their bills (or maybe they saw my blog post). So Arnold apparently felt the need to explain/defend this tax in its “Arnold Update” newsletter in the August 27 Leader:

Item in August 27, 2015 Leader

Item in August 27, 2015 Leader

Note how they try to pass the blame to American Water: “It is their choice.” In reality, it was Arnold’s choice to assess the tax. Note also that city ordinances allow for the electric, gas, and cable taxes, but not the one for sewer services.

We now know what Arnold wants to do with this clandestinely-acquired revenue. The September 10 council packet reveals a sewer lateral grant program on page 17 that would provide 100% of the costs for residents to fix their damaged laterals. That’s a good deal for some residents, and a bad deal for others.

Sales Tax Hike

The city council unanimously (with one absence) passed a measure to put a 1/2 cent sales tax hike on the November ballot for stormwater and infrastructure improvement, reports the August 27 Leader. As Mayor Ron Counts admits in the article, stormwater issues are the biggest problem in the city. But the city government has done very little on the issue. despite pleas from residents, instead preferring to focus on pet projects like the Corridor 55 co-working center, subdivision beautification and street light programs, and an infrastructure-heavy, city-run farmers market (in an era where most of these are run independently from government bodies). But now, the city is saying “you want us to fix your stormwater problems? Gotta pass a tax first!” Councilman Phil Amato said:

“People will have to decide,” he said. “They come up to the mic with real stormwater issues and now they can decide (whether to pass a tax to fund improvements).”

And Counts says:

“People want services; they’re demanding services, but they’re going to have to pay for them,” he said.

Of course, the people of Arnold don’t get to decide if they want to keep shoveling money at the hemorrhaging rec center and golf course, if they want to grossly overpay a third-rate city attorney year after year, or if they wanted the aforementioned boondoggles. But the city won’t help real people with real problems without a new tax.

This is despite the fact that the city just pocketed $9 million from the sale of the sewer system. Yes, some of that money is going to fix water problems at Melody Lane and Farmcrest Drive. But that will only use up some of the money. Here’s what Counts said about that money in the May 28 Leader:

However, Counts said, much of the $9.2 million will be left after these project are complete.

“We need to be very careful in spending this money,” he said. “This is a one-time thing. Once it’s gone, it’s gone.”

“As conservative as I am, I will really be recommending that we invest the money that is left over. This is something we can use for the future.”

It doesn’t seem all that “conservative” to me to put that money away somewhere, and then raise taxes. Plus, can we really trust this council not to spend that money ASAP? Counts says in the article he wants to fix Arnold Park’s perennial flooding issues. That won’t be cheap. And I’m sure there are other pet projects festering in the minds of council members.

The city employs the old selling point for sales taxes: all those out-of-towners will be paying it. City Administrator Bryan Richison estimates that 40% of the revenue from the tax will come from non-residents. That estimate probably presumes that those non-residents won’t take a look at Arnold’s near-10% tax rates (admittedly, some of that is from fire and ambulance districts, etc.) and decide to shop elsewhere. But I think they just might do that.

Why not Property Taxes?

If you are going to pass a tax, it seems like the property tax would be much more appropriate here. Who is going to benefit most from this spending? Property owners. But instead, the poor, people who rent, and people who don’t even live in Arnold will have to shoulder the burden for this spending. All because it is easier to get a sales tax passed by voters.

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Arnold Council Passes Sneaky (and Perhaps Illegal) New Tax

20 Aug

Arnold residents are now receiving sewer bills from American Water, which took over the system from the city in May. Residents may have noticed a new tax on their bill:

Arnold Sewer Bill from American Water

Arnold Sewer Bill from American Water

Did you not hear about this gross receipts tax? It was passed at the May 21 council meeting (agenda here). What, you don’t see anything on that agenda about a new tax? This is the bill that created the tax:

franchise ordinance

Nope, definitely nothing about a tax on the meeting agenda. Maybe they talked about it at the meeting? Nope. There was no discussion whatsoever at the meeting about any aspect of this ordinance before the vote (video here, May 21 video, 11:25 mark)

You have to look at the full text of the above ordinance, which lays out the agreement between Arnold and American Water. Here is the relevant section (click to enlarge):

Paragraph from Arnold franchise agreement with Missouri American Water

Paragraphs from Arnold franchise agreement with Missouri American Water

Under Missouri’s Hancock amendment, voters have to approve the creation of a new tax or the increase of an existing tax. Could it be that this tax was approved long ago but not actually charged until now? Something like that happened in Pevely in 2013, where a 5% gross receipts tax had been approved previously, but only 1% was collected until the board raised it to the approved 5% level. No public vote was needed.

Well, let’s check the Arnold ordinances. Here is the one (22-17) that covers utility taxes. Here’s what it says:

(a) Every business organization supplying or furnishing electricity or electrical power or electrical service in the city shall pay to the city an annual license or occupation tax in the amount equal to:

(1) Six (6) per cent of the gross receipts of such business derived from all users who are residential customers;

(2) Six and nine-tenths (6.9) per cent of the gross receipts of such business derived from all users who are not residential customers.

Sections (b) and (c) cover business organizations supplying gas or gas service and telephone service. But that’s it. Nothing in there about sewers.

There is a legal difference between a tax and a fee, and the latter are not subject to the Hancock Amendment. But I think this clearly falls under the definition of a tax. There is a franchise fee provision in the ordinances, but it only applies to video service providers (aka cable companies).

Did the ballot provision that approved the sale of the sewer system include tax language? No it did not (see page 8 here).

So it would seem to me that, at the very least, the city council passed a tax hike secretly, with no public notice and no attempt to notify anyone besides something buried in a council packet. Did the council members themselves even know they were voting on a tax hike? Heck, the Leader didn’t even mention the tax in its article on the finalization of the sale. For posterity, here is a list of Arnold city council members that voted for this secret tax hike, which passed unanimously:

VOTED FOR A SECRET TAX INCREASE:

Jason Fulbright
Butch Cooley
Brian McArthur
David Owens
Phil Amato
Nancy Crisler
Paul Freese
Gary Plunk

Beyond the secrecy, it appears that this may also be an illegal tax. It is not authorized in city ordinances, and the public did not get a chance to vote on it. This should really be no different than the tax you pay on your phone or gas bill. Those are collected from the customer by the business and submitted to the city, and those are set out in the city ordinances.

But the only way to challenge this tax is in court. Will anyone step up to take this on? Arnold is perhaps betting that nobody will.

Another Tax Coming?

At its August 20 meeting, the city council will consider placing a 1/2 cent sales tax hike on the November ballot for capital improvements. This tax would allow for the elimination of the stormwater fee, which some believe is also illegal. If I’m not mistaken, there will be absolutely nothing else on the November 2015 ballot, so Arnold will have to spend a lot to pay for the holding of the election.

Also, Arnold’s current sales tax rates (page 8) range from a base of 8.35% to 9.35% at Arnold Commons to 10.35% in the Ridgecrest TDD. Add 0.5% to these numbers if this tax is approved.

Arnold Sewer Sale: A Look at Last Time

17 Oct

As I have previously written, the city of Arnold is asking its residents to vote on November 4 to allow the sale of the city sewer system to Missouri American Water (MAW). This same issue was considered 2.5 years ago, when MAW offered the city $12 million for the system (the city owed $11 million on sewer bonds at the time). The city council voted unanimously on 2/2/2012 to reject the offer. Current city council members that participated in that vote were Phil Amato and Paul Freese.

In addition to the above terms, Utility Workers Union of America Local 355, which fought against the sale, stated that:

In its unsolicited bid to expand its empire by acquiring Arnold’s wastewater system, Missouri American Water demanded the City impose a nearly 20 percent hike in ratepayers’ sewer bills before the sale was completed. In addition, the company demanded agreement from the city that they would NOT oppose any future rate hikes requests before the Missouri Public Service Commission (PSC).

2012 Offer Rejected

Let’s look at the reasons Arnold gave for nixing the sale. Then and current mayor Ron Counts said in a press release:

Although American Water approached the city with a multi-million dollar offer, after careful evaluation of [the] matter, it was clear that not enough assurances could be provided to ensure the protection of the City’s residents or the City employees who were proposed to join American Water.

The city administrator at the time, Matt Unrein, gave a few additional reasons in a Leader article from Feb. 9:

It [the $1 million net proceeds] was not enough money to sacrifice local control.

This time around, the city will net $5.2 million in proceeds and then have access to the sewer reserve fund and its $4 million. From what I can tell from the 2012 city budget (p. 188), the sewer fund also had $4 million in it at the end of 2011, but nobody at the time seems to have mentioned adding the money to the net proceeds.

We want to make sure our (sewer department) employees are well taken care of, and as far as benefits, pay, and job security, we know we could take care of them best.

This time, MAW has agreed to hire the city’s seven sewer employees and “provide them with pay and benefits at least equal to what they have with the city.”

And here’s Unrein (who now works for the city of Ferguson) on the subject of rate increases:

With the Missouri Public Service Commission approving rate increases, there’s uncertainty there. With local control (of the system), we have the ability to run it as a break-even. They would have to make money. They’re publicly traded, and have stockholders.

Local 355 the point at the time that MAW had hiked the rates for the Cedar Hill sewer over 94% since 2007, and was asking for another hike.

2011 Mailer Opposing Sewer Sale

2011 Mailer Opposing Sewer Sale

But Unrein also said “rate increases are inevitable.” This turned out not to be true, at least in the short term. Arnold did not raise rates between then and now, and Unrein previewed the reason why: “The council is adamant it wants the cheapest rates we can have.” This failure to raise rates was short-sighted and politically motivated. Councilman Brian McArthur said on October 2 that “Everyone’s afraid to raise rates because they’re worried they will not get re-elected.”

This Time Around

This time, Arnold has threatened (in a bit of pre-election theater) to raise rates from $24.33 per month to $42.90 per month. Council member Mary Elizabeth Coleman seemed to agree about the intent of this hike when she said “It’s being done with the view to advance the sale,” according to the October 9 Leader. This hike was proposed but then tabled on October 2. MAW says its rate in 2016 will be “about $30.”

Here’s what Counts is saying this time around:

Arnold Mayor Counts said the sale looks better this time around because the city has tight finances right now and the sewer system is plagued with problems that will cost a lot to fix.

Those problems existed back then, too, though. He said in August that:

[T]he sale would benefit residents, too, because Missouri American is better equipped to fix and manage the aging sewer system.

Also, the company can operate the system more efficiently, which probably means lower sewer rates down the line.

However, the biggest differences between now and then seem to be that the city needs the money more now – as Counts indicated – and there is about $4 million more to be had, and the council can no longer avoid raising rates. Selling the sewer system brings in the money and relieves the council of the responsibility of raising rates.

Potty Politics in Arnold

7 Oct

No, I’m not talking about the regime’s attempts to manipulate the council and mayoral elections. Today I wish to discuss the potential sale of the Arnold sewer system to Missouri American Water. This will be on your November ballot as Prop S, Arnold residents.It should be noted that a similar effort was beaten back in 2012, with unions leading the fight.

At the August 7 Arnold city council meeting, when a crowd of angry city employees showed up to express their displeasure over a potential pay freeze and increased out-of-pocket health care costs, mayor Ron Counts had a tease for the crowd, according to the Leader:

“We’re not in a crisis yet; we’re trying to prevent one,” he said. “There is light at the end of the tunnel.” Counts said he was working on something that should help the budget but he couldn’t yet reveal what it was. “Hang in a little longer,” he said.

Well, we found out one week later, as a special council meeting was called on August 14 to vote to place on the November ballot the sale of the sewer system. The meeting was called during the last week to place items on the ballot. The meeting, which lasted seven minutes, did not include any opportunity for public comment. Phil Amato was the lone vote against the ballot measure; he wanted to investigate another entity that he thought might want to buy the sewer.

Fruits of the Sale

If approved, the city would sell the sewer system for $13.2 million. According to Yes on S Arnold (more on that later), the sale would transfer the city’s $14 million debt to the Metropolitan Sewer District (MSD) to Missouri American and eliminate the city’s $8 million bond debt. The site also states that the city will do $6 million in street and sidewalk improvements with the proceeds of the sale. The August 21 Leader reports that the city will net $5.2 million from the sale and also gain access to the $4 million sewer reserve fund, for a $9.2 windfall. At the September 18 council meeting, the mayor distributed a list (PDF – see page 5) of projects that the city would do with the cash. It was as follows:

  • Melody Lane – $2 million
  • Farmcrest – $160,000
  • Old Lemay Ferry/Richardson – $400,000
  • Ultra-thin Overlay (1 mile) – $110,880
  • 2-inch Overlay (1 mile) – $227,040
  • Concrete Streets (1 mile) – $807,840
  • Concrete Sidewalks (1 mile) – $126,720
  • Re-plaster Indoor Pool – $95,000
  • New Flooring at Rec Center – $50,000

The projects in the list would cost a total of $3,997,480, which would leave $2 million left over from that $6 million of promised improvements. A couple of council members have some other ideas, too. Phil Amato wants to put in a second outdoor water slide at the rec center, purchase the property between the Rec Center and Sherwood Elementary for an Olympic swimming pool to share with the Fox school district, and buy a snow plow. Jason Fulbright wants to get brine tanks, which have something to do with salt for the roads in winter. I’m sure there will be many more ideas.

Mounting a Campaign

The August 21 Leader article also states that Missouri American will cover the costs of the election and any marketing for the campaign. And oh, have they ever. A political action committee (PAC) called Clean Water Healthy Communities has been formed by Missouri American (the addresses of the treasurer and deputy treasurer are the same as that of the company). Missouri American has funded the PAC as follows:

  • $25,000 on 8/19/14
  • $75,000 on 9/17/14
  • $100,000 on 9/29/14

That’s $200,000 total, folks. This cash has gone towards the creation of the aforementioned website as well as a Facebook page (the page had about 40 likes when I shared it, and the next day it had about 110 – perhaps I deserve a fee from the PAC for that). However, I would argue that Arnold is participating in the campaign, in its tried and true way. The city proposed at the October 2 council meeting to raise sewer rates (PDF p. 37) from the current $73 per quarter ($24.33 per month) to $128.70 per quarter ($42.90 per month) if Prop S fails; a 76% increase . This comes across as a clear threat to voters. The rate hike was tabled at the meeting, but it gave the PAC what it needed to produce this graphic (posted on Facebook):

Yes on S Arnold graphic of potential sewer rate hikes

According to the Leader, Missouri American would not be able to raise rates until 2016, and a company spokesperson said they project to be charging $30 per month at that time. Now, the city admits that it has been derelict in raising rates. Jacob Engineering did a study in 2012 that said the city should have raised rates at that time. Their recommendation would have led to current rates of $103 per quarter (34.33 per month), with additional hikes required for improvements. In a September 11 ad in the Leader, the city said “Over the last twenty years the sewer rates were held artificially low because the City Council was reluctant to raise them.” Interpretation: they didn’t want to risk losing their council seats. Perhaps council members Paul Freese, Phil Amato, and Butch Cooley, who have spent much time on the council, should be asked about this dereliction of duty. But why not raise the rates now to $103 per quarter instead of the proposed $128.70? Not enough shock value in the lower number?

Other Arguments

While the city council members are focused on the cash windfall that would result from the sale, the other arguments the city is putting forth are that Missouri American will charge lower rates than the city (see above) and that Missouri American has the expertise to deal with increasing federal and state regulations and the resources to invest in sewer upgrades. Missouri American promises to do $5 million in immediate upgrades if the sale goes through. The company would have to go to the Public Service Commission to get approval for any rate increases, although that seems to be a low bar (witness all of Ameren’s recent rate hikes).

We are less than a month from Election Day, and this campaign is really just getting started. It was a disservice by the city to get this ball rolling so late; there will not be time to properly educate the voters about this issue. In addition, the voters probably will only hear one side of the story, as there appears to be no organized opposition to the ballot measure, and if such opposition emerges, it won’t have $200,000 to spend. Here is a collection of documents I have cited above:

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