Bolton: Columbia mayor banks on growing tax base to reduce water, sewer fund transfers

Associate EditorApril 14, 2013 

Bolton

TIM DOMINICK/TDOMINICK@THESTATE.

— WHILE A NEW policy to “cap” the amount of water and sewer revenue Columbia City Council can transfer annually to its general fund would allow it to divert a higher percentage than it ever has from the utilities account, Mayor Steve Benjamin said that’s not the intent and that there is still a possibility the transfers could end one day.

As a matter of fact, he told me during a recent interview, he believes things are taking shape to give the city that option, although it wouldn’t happen overnight. A resurging downtown, the University of South Carolina’s Innovista, the mixed-use project proposed for Bull Street and other development in the city might hold the key to whether — and how soon — Columbia stops diverting money needed to support its water and sewer system to pay for police officers’ salaries, garbage pickup and other services.

A healthy dose of private development would boost Columbia’s tax base, something sorely needed in a municipality where officials estimate that more than 60 percent of all property goes untaxed. For decades, city officials have justified swiping tens of millions of dollars in water and sewer revenue for other uses by saying it allows them to keep property taxes down for its limited number of taxpayers. They say that’s a benefit that city residents deserve as owners of the water and sewer system.

But an expanded tax base could allow the city to significantly reduce the water and sewer fund transfers “over the next five to 10 years,” Mr. Benjamin said.

Of course, he didn’t say the transfers could — or would — end completely. “I do believe still that the citizens have some interest in receiving the benefit of serving the entire region,” he said. “I think you can invest in the water and sewer system and also contribute to the general fund.”

I’ve got no real problem with the city using a reasonable amount of revenue to meet other important needs — if water and sewer needs are met first. That’s certainly not the case now; hasn’t been for years. How much money can there be to spare when the system is dilapidated and needs hundreds of millions of dollars in repairs? How much money can there be to spare when customers are bracing for yet another rate increase in May to help pay for those improvements?

For decades, the city has taken money out of the system — sometimes for unnecessary pet projects — without regard for the fact that it was needed for expansion and to keep water and sewer lines updated and operating smoothly.

The current City Council didn’t create this mess; it inherited it. The city grew to rely on these transfers to help fund vital services. If the council were to end the practice cold turkey, it would have to raise taxes or cut services significantly.

Mayor Benjamin said some people assume that if the city stops transferring the $4.5 million now, that would eliminate the need to raise water and sewer rates to pay for improvements. While it would reduce the amount, there still would need to be increases, he said. And there still would need to be a property tax increase or service cuts to make up for the resulting revenue hole in the general fund.

So, current council members face a tough challenge in considering how to reduce or end the transfers. But they must find a way to reset priorities when it comes to funding maintenance and improvements of the system. The city never should have gotten into a position where it so relied on the transfers that it was willing to allow water and sewer needs to go lacking.

Every time the sitting council transfers another $4.5 million from the water and sewer fund, as it does every year, it adds to that irresponsible legacy.

And the council’s recent approval of a policy capping transfers does nothing to change that.

The policy says the city can’t transfer more than 5 percent of annual water and sewer income into the general fund. City officials say they have never transferred more than that. The $4.5 million that has been transferred in recent years is about 3.9 percent of the total.

Mr. Benjamin said the new transfer policy was needed to replace an older one from the 1980s that was so convoluted that it was hard to decipher. He said it would have allowed transfers of more than $10 million. So, while the new policy would allow more than what is now being diverted, it’s an improvement, he said.

But what does it mean that the current council has decided that it should be able to extract as much as 5 percent of water and sewer income, which would equal about $6 million? The focus should be on reducing these transfers, not increasing them.

Mr. Benjamin said he believes the city can reduce the transfers and that he likes the direction city manager Teresa Wilson seems to be heading in, recommending a $250,000 reduction in the 2013-2014 budget. She acknowledges it isn’t much but asserts that it is a start. She’s right on both counts.

The mayor said it might be possible to one day have gradual deductions of $500,000 or even $750,000 in a given year, as long as it is not so much that it would “shock the budget.”

Sounds like a plan.

Reach Mr. Bolton at (803) 771-8631 or wbolton@thestate.com.

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