The City Council is currently considering a bill to increase the City’s utility tax rates in order to help offset stagnant growth in the City’s two largest revenue sources, sales tax and utility taxes. The FY19 budget also calls for expenditure cuts including the elimination of three full-time positions, but additional revenues are needed to maintain existing service levels.
The utility tax rate has not been increased since 2005, with a current rate of 7% on natural gas, water, telephone, and commercial electric service. The residential electric rate is 5.5%, lowered from 7% in 2013. New rates are proposed as follows:
• Residential utility rates to be uniformly set at 7%, including returning the electric rate to its pre-2013 level.
• Utility tax rates for commercial users on all services to be increased to 8%.
Examples of rate impacts are as follows:
• A residential electric bill of $150 will see an increase of $2.25.
• A commercial electric bill of $400 will see an increase of $4.
Residential gas, telephone or water bills will not increase.
Revenues for the City’s General Fund have been flat over the last ten years. During the same period, expenditures have increased an average of 1.7% annually, a modest amount yet beyond the rate of revenue growth. This trend is further exacerbated by the recently announced Ameren rate reduction of 6.1%, which will result in a reduction in city utility tax receipts of approximately $200,000 annually.
The utility tax rate increase would generate $600,000 in annual additional revenue. Even with the proposed increase, the City’s long range projections suggest that additional measures will be needed in the future, in the form of greater revenues, reductions in expenditures, or a combination of the two. Absent such additional measures, a General Fund deficit of $1.6 million is projected for 2023. To this end, the citizens’ Finance Committee is examining options and will be making recommendations to the City Council later this year.
The final reading and possible adoption of the utility tax amendment is scheduled for the next City Council meeting on Tuesday, September 11. If approved, the rate increase would become effective November 1.