The City's Budget & How Your Utilities Are Funded
Here's a helpful video from the Association of Washington Cities that explains how cities plan and pay for city services and the challenges they face.
The Budget
Delivering services to our community is the heart of what cities do. The majority of cities’ operating revenue comes from property tax, sales tax, business and utility taxes. All of these taxes go into the city’s General Fund which pays for essential services.
State laws can put limits on taxes including property taxes which are capped at a 1% increase each year. The result is that although property tax is the city’s largest revenue source, it does not keep pace with inflation or population growth. For each dollar you pay in property taxes, the city only receives about 21 cents. The rest goes to the state, Snohomish County, Edmonds School District and junior taxing districts (fire, hospital, and library).
Of the 21 cents the city receives, nearly two-thirds of the revenue pays for public safety including police, fire, jail costs and emergency medical services. The remaining one-third pays for streets, sidewalks, parks and other essential services.
It is important for the community to know that utility systems like water and sewer are accounted for separately. Local government utilities are paid for out of an Enterprise Fund, a self-supporting government fund that sells goods and services to the public for a fee. Your utility bills directly pay for the utility system it supports and they cannot be used for other purposes.
Rates
The city’s intent is to conduct a rate survey every six years and make gradual increases to adjust with the costs of providing water, sewer and stormwater service. The rate study generates a pricing structure and financial plan to satisfy the long-term obligations of the utility that include providing the utility service, maintaining the infrastructure, and replacing pipes and systems after they have completed their useful lives. It also addresses legal and regulatory requirements the city must adhere to.
During the recession, the city did not fully administer the recommended utility rates and so rate increases are necessary to catch up with today’s costs and planned maintenance and replacement of our aging system. The city’s utilities were installed mostly in the 1960’s and 70’s and those pipes are now failing in their old age.
Challenges
Deferring replacement of aging pipes and facilities results in major emergencies that have expensive repairs and dire consequences including sewage backups, loss of water, local flooding, and sink holes that can collapse streets. Addressing those emergencies ends up costing more money which in turn in passed along to utility customers. Many local governments are experiencing similar challenges of having a revenue structure that does not keep up with inflation and population growth to replace aging utility infrastructure. State and federal funding to cities has also decreased and General Fund revenues are also stretched.
Therefore, it is important to repair and replace hundreds of miles of aging pipelines and address our treatment plant needs before major service disruptions occur. It is easy to take our utility systems for granted because they are out of sight and out of mind. However, when they no longer work or they break down, they become a top priority!
Delivering safe and reliable drinking water, treating your sewage, and managing stormwater are essential services that must be addressed on a continual basis.
Regulatory Requirements
Cities must comply with a number of federal, state and local regulations. Examples include the Federal Clean Water Act, National Pollutant Discharge Elimination System (NPDES), National and State Environmental Policy Acts, and the Shoreline Management Act.