Search 2.0

Wednesday, May 19, 2010

How the city raises your taxes without calling it a tax increase

I have found no one better at this bit of a budgetary shell game than the financial wizards at the City of Dallas. Basically the plan these brainiacs have devised to help reduce budget deficits is to levy taxes on city government itself and then get us to pay for it through increased fees.

Let me give you an example of how this bit of trickery works. Every utility that holds a franchise with the City of Dallas has to pay the city a yearly fee for the right to maintain that franchise. The cable company pays it. The gas company pays it. The electric company pays it but not as much as it used to back in the days when the electric company was known as Dallas Power & Light Co. Because along came deregulation that allowed all sorts of ne-er to wells to infringe on the power company's monopoly -- a monopoly that was supposed to be insured by securing the franchise.

There was only one major utility that didn't pay the city a franchise fee and that was the water utility. Why? Because the water utility is a department of the city. But the water utility is known in City Hall parlance as an enterprise department. That means all of the money it spends must come from what it charges you, me and other cities for water. But those charges can only be used by the water utility and can't go into the General Fund, that bank account on which money is drawn to keep city government operating. So when money started becoming harder to come by at City Hall for the General Fund, the brainiacs said "We could get additional revenue by charging the water utility a franchise fee just like we do all the other utilities." Only they didn't call it a franchise fee; they called it Payment In Lieu of Taxes, or PILOT. In order to raise the money needed to pay PILOT, water utilities upped our water rates. See, not a tax increase, but your taxes have been raised; they were just disguised as a water rate increase.

Times have not gotten much better at 1500 Marilla, so the city, emboldened by the trickery successfully pulled off in the name of PILOT, began searching for other departments that charge fees to tax. The search was not a long one -- the target now is simply another department that includes its fees on our monthly water bill. That's right -- the city is going to start taxing Sanitation Services and force us to pay for it.

Again, while the tax is without merit, it is not without precedent. City garbage collectors only collect the trash and recycling from Dallas homeowners as well as at city parks and other municipal facilities. The refuges from apartments and businesses are hauled away and deposited by private companies, all of whom pay the city for the right to engage in such business. Why do they have to pay the city? The logic is that their heavy trucks chew up city streets and this fee is their share of street repair and maintenance.

But, so the logic goes, the city's trucks have been doing the same thing and no one ever demanded that hauler pay for its share of street maintenance. But all that's about to change. Word is that City Manager Mary Suhm is going to impose this franchise fee on her own Sanitation Services, which, while not an enterprise department in the strictest sense of the word, does operate on the revenue it generates from garbage fees paid by residents.

You have to burrow pretty deep into this Dallas Morning News story to find this telling paragraph:

"The city's sanitation department traditionally has charged only what it costs to provide service. In order to funnel money into the general fund, the city would charge its own sanitation department a fee for the use of city streets and alleys."
And where would Sanitation Services get the money to pay this fee? By raising what it charges us, naturally. The estimates are that the garbage fee would increase 71 cents a month, not a huge tax increase by any stretch of the imagination, but it is a tax increase even though the city will never admit to it.

You gotta admit. It is a diabolically clever, albeit underhanded, way to raise taxes without ever calling it a tax increase.

No comments: