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City considering utility fee to fund economic development

City Council is considering an annual fee that would add $400,000 to economic development budget.

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By Dave Greber, Staff Writer 12:54 AM Sunday, July 4, 2010

HAMILTON — In the coming months, the city could ask residents and businesses to dig deeper into their pockets to help spur economic development.

City Council is considering legislation that would add an annual mandatory fee to utility bills to pay for incentives to lure prospective employers and boost Hamilton’s bottom line.

The difference could be as little as the price of a soft drink for the average residential customer, or as much as a monthly payment for a luxury vehicle for large businesses that consume a lot of water or electricity.

Utility bills currently include two such fees for two different types of unfunded mandates: One to cover expenses for environmental regulations, and another for a variety of requirements handed down by state and federal governments, said Finance Director Bill Moeller.

The proposal on the table now, which, if approved, would add $400,000 to the city’s economic development budget.

“Economic development is a balance between business attraction and business retention,” said the city’s economic development specialist, Melissa Johnson-Gabbard. “In everything we do, we have to be cognizant of our existing companies and our companies of the future.”

Finding balance will be important.

“For me, it’s the first attempt to explore economic development opportunities in this economy and try to make sense out of it,” said Councilwoman Kathleen Klink.

“But without economic development, how do you revitalize your community? How do you incentivize people coming to your community?”

Proposed utility charge draws some opposition

Although the possibility of adding a fee to residential and commercial customers’ utility bills to pay for economic-development projects has been discussed for months, the issue likely won’t come down to a vote for at least another two weeks.

And when it does appear on City Council’s agenda — as it’s expected to for the first time July 14 — there’s no guarantee the idea will come out a winner.

At its May 12 meeting, City Council was presented with a scenario that would raise $400,000 — or $100,000 from each utility, gas, electric, water and wastewater — for the purposes of providing additional financial tools to the city’s economic-development efforts. If approved, it would only bring local incentive capabilities back to pre-2008 levels, when across-the-board cuts were implemented.

Proposed legislation states the money must be used for a public purpose and it must provide a benefit to Hamilton utilities.

For example, should a large prospective employer be offered some sort of financial incentive to locate to Hamilton, the move would both boost the city’s general fund through additional income taxes and support utilities by generating additional customers.

What residents and businesses would pay to raise those funds depends on individual utility usage.

Should City Council agree with the amount proposed in May, it would increase utility costs for the average residential customer approximately $13 per year. It would mean much larger increases for commercial customers, especially those who consume larger amounts of gas, water and electricity.

If the plan is approved as is, Hamilton City Schools would be asked to pay an additional $5,000; the county more than $5,200; Mohawk Fine Paper more than $1,200 and Fort Hamilton Hospital more than $1,100.

Officials from Mohawk have been the only commercial entity to speak out publicly against the economic development rider, as they stated their case at the May 12 meeting that their bottom line would be sacrificed for new business.

Some council members argue this point, and say there should be a way to “hold harmless” existing large utility customers.

City Council could approve the measure as it’s presented, or it could choose to adopt an ordinance allowing the ability to implement a fee that would be decided at a later date and be akin to a specific economic development project. A final vote might happen in August.

But support could be an issue, as at least a few of seven members — including Mayor Pat Moeller and Councilman Archie Johnson — say they would vote 'no’ on the ordinance as currently proposed.

“I’m not going to say yes to something blindly,” Johnson said this week. “At this point, I don’t know what project they want to use it on. If you don’t have a project in mind, what’s the purpose of doing it?”

Both Finance Director Bill Moeller and Economic Development Specialist Melissa Johnson-Gabbard said there is no specific project — or prospective company — on which economic development rider funds would be spent.

Moeller said he’s not in favor of the legislation in its current form because it’s too open-ended.

“I believe it could be a slippery slope when it comes to this kind of taxing or collecting of money,” Moeller said.

Others, however, feel the potential for such a move is best for the city’s long-term financial stability.

“I do support this,” said Councilwoman Carla Fiehrer. “It’s a key tool to provide to economic development, and for us to be able to put incentive packages together to bring businesses to town.”

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