Columbia City Council members will not raise your property taxes next year. They want to raise your power bill instead.
The city is stuck with 42 police cars with more than 100,000 miles on each of them and a fleet of expensive, and decaying, garbage trucks and firetrucks. To replace them, the city has two options: raise property taxes or raise power bills.
After Wednesday's council meeting, it appears council members are favoring the power bill option.
Two weeks ago, council members said no to a $1.7 million tax increase to replace the vehicles. But they still want to replace the vehicles.
City manager Steve Gantt's solution was to raise the city's franchise fee, which is what the city charges South Carolina Electric & Gas Co. to run power lines through the public rights of way.
The current franchise fee is 3 percent of every power bill. Gantt's proposal is to raise it to 5 percent, which is the maximum allowed under the city's franchise agreement with SCE&G. The fee is considered a pass-through fee, meaning SCE&G can automatically pass that cost along to its customers without asking state officials for a rate hike.
The earliest the city could begin charging the higher franchise fee would be September, which means the city would earn an additional $1.2 million from SCE&G this year. In 2011, the city would earn an additional $3.6 million, once the fee is in effect for an entire calendar year.
Gantt said increasing the franchise fee, and thus increasing power bills, is a more fair way for the city to raise money. That's because two-thirds of property owners in the city limits are exempt from property taxes since they are schools, churches, state government buildings or other nonprofit associations. A property tax increase would mean one-third of property owners would shoulder the burden for everyone.
"At least with a franchise fee, everyone in Columbia would pay their fair share," he said.
But the power bill increase would come as SCE&G has already requested a 6.55 percent rate hike that will go onto bills in three installments over a year starting July 15. The utility also is expected this month to request a third increase to help pay for expanding a Fairfield County nuclear plant. That increase would start Oct. 1, with requests coming each year until the plant expansion is completed in 2019.
Two weeks ago, council members cited those rate hike requests as reasons for not supporting the proposed property tax increase. But Wednesday, most council members indicated they would support increasing the franchise fee, even though it would mean higher power bills for city residents.
"SCE&G has gone up on everybody so many times the last couple of years, including us," Councilwoman Tameika Isaac Devine said. "We have not gone up on the franchise fee."
Most S.C. cities charge utilities a franchise fee, said Howard Duvall, the longtime executive director of the Municipal Association of South Carolina, who recently retired. The average in South Carolina is about 3 percent, he said, but noted that some cities now are increasing the fee as a way to raise money while the collection of other historical revenue producers, such as business license fees and building permits, declines.
Also, "the ability to raise property taxes has been severely limited by the state Legislature," Duvall said. "I think all local governments, school districts and municipalities included, are looking for different ways to generate revenue to provide services."
City officials must notify SCE&G in writing 90 days in advance before they can increase the franchise fee. The city would also likely hold a public hearing.
"This is an option we will want to take a good look at," Councilwoman Belinda Gergel said.