Minutes 06/08/1971 - Laserfiche WebLink

Home Browse Search

857 June 8, 1971 Beer and Wine Tax - $7,150 The City currently has a license tax of $100.00 for beer and wine licenses. The State restricts this license tax to 5100.00 if beer only is sold. If beer and wins are sold on the premises, the City is allowed to charge a tax of $1S0.00. This would increase the tax to establishments'selling both beer and wine to a rate of $150.00 -- the maximum allowed. Building, Electrical & Plumbing Inspection Permits & Fees - $72,500 This is a revision in the fee schedule, rearranging some categories and increasing fees slightly. The Cities of Norfolk and Chesapeake, I am advised, are in the process of adopting the same fee schedule. Water Service Lithe Fee $60.00 This would increase the present fee from 560.00 to 6100.00 for a 3/4" water line. Larger size lines would be proportionately higher. This would apply only to the installation of new service lines. The replacement of lines installed by the citizens prior to 1962 would remain at a fee of $50.00. This would also include a 50% surcharge for service outside of the City of Portsmouth. Water Rates $186,800 This would be an adjustment in the second step of the water rates and eliminate the 'third step. Ther'e would be no change in the current initial step of 35e per hundred cubic feet, in which all residential property falls. This increase would affect the large users of water to whom the City is selling at a loss. This would not affect any residential water users in the City.- ~ - It is estimated that the above new sources of revenue will produce $1,536,450 and pro- vide a batanc'ed budget for the City, maintaining our pr,esent level of services. The budgets of the Utility, City Garage, Capital and Law Library Funds are self-support- ing and requi're no additional sources of new revenue for the coming budget year. There are no major increases in these budgets, except for debt service in the amount of $102,735 cover- ing the purchase of the Hedgerow Water System and payment on bonds issued for new sewers. While it is not necessary to raise additional money for-the operation of the above funds careful consideration should be given to the following; It is' hetieved tha% the citizens of Portsmouth, as owners of the water and wastewater utilities, are entitled to and should expect a reasonable rate of return on this investment. Based on current economic conditions, I consider a 5% return conservative and 7% not too high The actual rate of return desired should be established by the City Council as a matter of public record and the utility ~ates established to produce the desired return. I recommend that City Council establish the rate of return that the Portsmouth Public Utilities should earn on the investment involved in each Utility. During the past years, the Water Utility has earned a return which has been paid to the General Fund for the benefit of citizens of Portsmouth. However, the public has not associ- ated this as a return to them but instead it has been considered a hidden means of trans- ferring funds to the Ge'neral Fund resulting in higher water rates. Th~ following are reasons I believe a return on the investment is justified and should be expected ~m~evmn demanded by citizens of Portsmouth: (i) There was a book value investment in the Water Utility of $24,207,485 as of June 30, 1970. If this money were invested elsewhere, it would earn for the citizens a rate of return of approximately 5% to 6%. Based on current water rates and charges, the projected revenues and expenses for t971-72 will yield a maximum return of $899,169 or 3.7% on June 30, 1970 investment. This does not allow for subsequent additions ncr does it allow for any improvements from current revenue. The maximum cash available to be transferred to the General Fund would be $528,150 or approximately $191,000 less than 1970-71. The re- mainder of the $899,169 return would be $115,395 in bond payments in excess of depreciation; $204,624 in ~nterest payments considered as return on investment in Virginia; and $55,0.00 invested mn necessary equipment replacement. (2) A return on the investment paid to the General Fund represents cash that must be obtained to meet the municipal budget. This cash could be obtained from other sources as well as from a return on the Public 'Utilities. If Portsmout~ were a small community serving-only tax-paying property owners, the City Council could decide which source to use. Approximately 50% of property in Portsmouth is non-t.a~able. Therefore~, if no return on the P~blic Utilities were realized, the tax-paying property owner would be asked to accept no return on his invest- ment in exchange for a property tax burden not shared by 50% of the property in Portsmouth. In addition, no property tax burden is borne by out-of-town customers. Approximately 34% of the water treated and pumped was delivered to U. S. Government installations or to customers outside the City of Portsmouth. This does ~ot include other customers in.Portsmouth that may be exempt from property taxes. (Customers in Nansemond Coun'ty pay a ~ater rate which is double the Portsmouth rate for the first rate step. This is a matter of policy and ~t should be reviewed along with the policy on rate of return.)