Monday, Sept. 29, 2003 | 11:10 a.m.
The Las Vegas City Council will hear a plan Wednesday that would raise sewer rates 40 percent over the next two years and add a 5 percent surcharge to sewer bills.
Under the proposal, fees that developers pay to connect to the city sewer system would go up 40 percent, and the city would impose annual increases tied to the Consumer Price Index on all users.
If passed the increase would be the first in 10 years.
"We're required by statute to review our rates at least every two years," said Mark Vincent, director of the city's Financial Services Department. The last increase was in 1993, he said, and "the decade of the '90s was the fastest-growing period for Las Vegas.
"We're still one of the fastest-growing cities."
Although the city spent $170 million to improve its sewage collection and treatment during that time, "We did not ... raise those rates; we probably should have, in retrospect," he said.
If the council approves, the next step would be for city staff to draft an ordinance for introduction. The soonest that could happen is Oct. 15, and it generally would be followed by another two-week period before council could adopt it and make it municipal law, although it could take longer to work through the issue.
The proposal was spurred by a city analysis that indicated its reserve funds -- used for emergencies and capital improvements -- would dwindle to nothing by the end of fiscal 2005.
That would come at a time when the city has ongoing expansion "in the $40 (million) to $50 million range," Vincent said. In addition, hundreds of millions of dollars in work is planned to start within the next 10 years, he said.
The city used Hobbs, Ong and Associates to perform a rate study for sewer and connection fees, and that report formed the basis for the recommendation for an increase. City staff is recommending a 20 percent increase beginning Dec. 1, followed by the second 20 percent increase a year later. The annual CPI-based increases would follow every December.
In dollars, the connection fees would go up from the current $1,200 per home to $1,680 over two years, according to information provided by the city.
The connection fees are paid upfront by builders, but eventually are passed to consumers, said Irene Porter, executive director of the Southern Nevada Homebuilders Association. Her organization has not developed a position on the idea , and is waiting for meetings with city staff to hear more about the proposal, she said.
"In the past ... we have done everything from support a fee to not support a fee," Porter said. "It depends what the facts are when we sit down and look at them."
According to information provided by the city, its sewer and connection fees are among the lowest in the valley, and would remain so even after the increase. North Las Vegas already has passed an ordinance to increase its rates for three consecutive years, according to the city documentation prepared for Wednesday's council meeting.
Over two years the sewer fees would go up from an average of $138.80 a year to $204.04. That would be followed by annual CPI-based increases.
However, in addition to the sewer fee increase, the proposal calls for a surcharge of 5 percent a year on municipal ratepayers.
While sewer and connection fees are dedicated to the operation, maintenance and expansion of the wastewater systems the city controls, the added 5 percent annual charge -- considered a fee charged "in lieu of" a franchise tax, which is paid by utilities that use public right of way like streets -- would be used to offset the cost of running municipal Las Vegas.
"There is a tax we charge for the right of being in the city's right of way," Vincent said. "It is our position the residents ought to reimburse the city for the value of the access."
He said the idea is not new. In fact, it was discussed publicly during City Council budget hearings in May, he said.
"(City Council) gave me direction at the budget hearing to move forward with that," he said. "Ultimately it's up to them as to whether they want to proceed with this."
Franchise fees are long established for such private utilities as cable, telephone and power, which are paying for the right to use valuable public right-of-way, as well as the wear and tear from heavy trucks and other maintenance operations on public property like streets.
In this case, the city owns both the utility and the property. So the proposal could be considered taxing municipal Las Vegas residents for the city utility's right to use city property, with the money used to offset the general cost of providing services like parks and libraries.
"I've never seen a similar tax on a similar utility as that," said Jeremy Aguero, an economist who practices fiscal analysis for the company Applied Analysis and studies taxes and fees applied locally and statewide in Nevada.
He said although it's not strictly a franchise fee, "They are creating something similar to a franchise fee. ... It's likely additional scrutiny will be required to see if the practice is consistent with state law on franchise fees."
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