City discusses utility fee
Funds would pay for streets
By Bert Lehman
In an effort to raise money to repair deteriorating streets, the city of Clintonville discussed creating a transportation utility fee that would be assessed to residents and businesses.
The funds raised would be used for major utility and street reconstruction projects.
Clintonville City Administrator Chuck Kell told the Finance Committee at its May 8 meeting that there are two parts to creating a transportation utility fee.
“The first one is the transportation utility ordinance which would create a new fund for the city,” Kell said.
Kell had assembled almost everything that would be required in order for the city to adopt this type of a fee structure. He added that there are a couple of different ways for the fees to be structured to create a budget for road improvements.
The first is based on accepted practices and professional information through the Institute of Transportation Engineers trip generation models.
“It would require quite a bit of work to go through the city and catalog every business that’s in existence, so every manufacturer, every commercial business we would have to classify and determine a trip factor for them based on their square footage,” Kell said. “And then a monthly charge system.”
The committee was shown an example of how such a system would work. In the example residences would be charged a flat fee, while commercial and industrial businesses would fall into one of six tiers, based on their monthly base trip rates.
The other way to implement a transportation utility fee would be using a flat fee model.
“That would be a lot easier but I think what happens with that is it treats more of the properties the same when in fact in real life one manufacturer of a certain size may not generate nearly as much traffic as another manufacturer of a large size, for example trucking,” Kell said.
Kell added that the trip generation model is more sensitive to the actual type of business and the size of the business based on square footage.
Kell told the committee this type of funding has been done under home rule authority, which the city of Clintonville has in Wisconsin. He added it hasn’t been done much in Wisconsin, but it has been done in other states.
In the past, the Finance Committee had discussed the possibility of adding a “wheel tax” in the city. Kell informed committee members that the current state budget that is being discussed for passage might have a provision in it that would eliminate the authority of communities to implement a wheel tax.
If the city establishes a transportation utility fee, money can be borrowed under a revenue bond with the utility fees being the committed mechanism to pay off the revenue bonds, Kell said. Going this route doesn’t hurt the city’s general obligation funding.
“So you’re not going to get closer to your bond limit,” Kell said. “It’s going to save capacity in your general obligation bonding for other departments.”
Kell told the committee that the city’s financial advisor agrees with that assessment.
“From a legal standpoint Ehlers definitely stands behind the methodology, that you can use revenue bonds to fund your street improvements instead of general obligation (bonds),” Kell said.
Kell said he didn’t expect the committee to act immediately, but it needs to start discussing a fee structure and how to set up the fees if the city decides to implement such a system.
Based on the above, Kell also presented the committee with what he called an “out of the box approach” to funding street reconstruction projects. He said he’s been in contact with USDA, and he is confident he can get a large loan/grant for utility and street replacement in the city.
“The thing is, they don’t like to fund small projects,” Kell said. “So I’ve got this started at $15 million. We can do 10, nine, eight, but if you get much smaller they probably won’t fund your project.”
The USDA does not have a loan limit, Kell said.
The city currently has a $10 million loan/grant from USDA for the construction of a new wastewater treatment plant.
The example Kell presented to the committee for street improvement called for a total request from USDA of $15 million. Of that amount, $11.25 million would be in the form of a loan, and $3.75 million in the form of a grant. Loans can be extended out 40 years.
Kell presented the committee scenarios in which the loan portion was paid back in 40, 30 and 20 years.
“What I like about that is it provides the city with some money that you don’t have to repay,” Kell said.
In order to qualify for USDA funds for utility replacement and street replacement, the city would need to identify projects that require all three, Kell said. This would require projects that require sewer and water lines to be replaced, as well as the street.
New Clintonville City Administrator Sharon Eveland informed the committee she has already started working with city department heads on identifying projects that would meet that criteria.
Kell said the USDA allows for a four- to five-year implementation plan, meaning all the projects don’t have to be completed in one year.
“If you want to try and do something that has a big impact in terms of fixing the infrastructure of the city and fixing the roads without having to wait 25 years this would be a way to do it,” Kell said.
The funds generated from a transportation utility fee on residents and businesses would be used to pay off the loan, Kell said.
Finance Committee Chairman Mark Doornink said the idea is something to consider. He also encouraged others who have ideas on how to fund street replacement in the city to present them to the committee.
Committee member Mike Hankins asked Kell if any other municipalities have a transportation utility fee. Kell said he thinks Weston is the only municipality in Wisconsin that has a transportation utility fee.
“I feel really good about it because all the states that have put this in place have done it under the home rule authority,” Kell said. “It’s been in court and it’s stood up.”
Kell told the committee if a transportation utility is formed, the funds can also be used for road maintenance, not just replacement. The funds can also be used on bridges, transportation facilities, and purchasing equipment that is related to road maintenance and repair.
“I think that’s one of the problems the city has is it builds a road and then nobody looks at it again,” Kell said. “There’s a lot of maintenance that should go into roads every couple years. Because of lack of money and other needs you haven’t been able to do that.”
Doornink said if the city decided to pursue a transportation utility fee, the money has to be dedicated to the city’s streets.
Kell said under the system he presented, the funds can only be used for that purpose.
The committee decided to solicit feedback from constituents and continue to discuss a transportation utility fee at its next meeting.