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City water, sewer customers will pay $2.5 million more this year

Commissioner Fish calls for new look at utility license fees for city utilities


Portland sewer and water customers will shell out an additional $2.5 million this year for “utility license fees” that go straight into the city general fund — not into water and sewer projects.

The news, confirmed by the City Budget Office, could be another public relations bonanza for big commercial water users, who are backing a May 2014 initiative to strip control of the city water and sewer bureaus from the City Council. They argue that city councilors have used sewer and water funds as a “slush fund” to pay for unrelated projects.

But in this case, ironically, the higher utility license fees are coming as the City Council finally makes good on a 2004 pledge — sought by the same commercial water users — to stop charging sewer and water customers higher utility license fees than those charged to customers of private-sector utilities.

To understand this good news/bad news development for city water and sewer customers, flash back to 2004. Back then, the city was tacking on a 7.5 percent utility license fee on water and sewer bills and a 5 percent utility license fee for customers of PGE, NW Natural and other utilities. Utility license fees, a significant revenue source for the city, are viewed as compensation for utility use of city streets and other right of way.

But some critics question why the city needs to tax its own utility customers. “The city is levying a tax on itself,” says Kent Craford, copetitioner of the ballot initiative calling for a Portland Public Water District to manage the city water and sewer bureaus.

But the utility license fees provided $17 million a year to the general fund in 2004, and thus were a significant source of funds for city police, fire, parks and other services that depend on the general fund.

So, in response to Craford and other outraged sewer and water customers, City Commissioner Dan Saltzman advanced a 2004 ordinance that gradually equalized utility license fees at 5 percent. To put that into effect, his ordinance froze sewer and water utility license fees at 2004 dollar amounts, limiting the hit to the city budget.

That kept sewer utility license fees at $12.8 million a year and water fees at $4.2 million a year for the past nine years.

“I was very happy with what they did,” Craford says.

But a few months ago, city budget analysts calculated that the frozen fees finally equaled 5 percent of sewer and water rates.

So on Wednesday, making good on their 2004 promise to equalize utility license fees, the City Council will consider an ordinance permanently setting a 5 percent utility license fee on water, sewer, gas, electricity and phone bills.

But hitting the 5 percent level effectively ends the 2004 cap. And, because of rising sewer and water rates, the 5 percent utility license fee is expected to bring the city $13.8 million from sewer bills in 2013-14, and nearly $5.8 million from water bills, says Jeramy Patton, assistant city budget director. That’s about $2.5 million more than the capped amount.

“This is a sad day; It’s not a happy day,” Craford says. “It means City Hall is taking more money out of ratepayer pockets going forward.”

Though Craford opposes the idea of the city taxing its own utility customers, he concedes the city has the legal right to do it. And the city charter amendments contained in his initiative don’t touch the utility license fees, Craford says. “We thought that would be going too far,” he says, and spark more opposition.

But in a campaign likely to put a spotlight on the City Council’s use of sewer and water rates to wrangle money for unrelated purposes, the 5 percent utility license fee figures to be the single-largest example of that practice. The $19.6 million to be raised this year, and more in subsequent years as sewer and water rates rise, dwarfs the amount of money the Portland Water Bureau spent on a new headquarters for the Portland Rose Festival Association, or to build the Portland Loos, for example.

Still, Craford says the utility license fee illustrates why an independent board is needed to manage the two bureaus.

“By skimming 5 percent, effectively, off the top of the rate base, it’s in the City Council’s interest to see the rates rising,” he says. “That’s a built-in financial incentive to keep rates going up.”

City Commissioner Nick Fish, who oversees the sewer and water bureaus, says he’ll seek to use the item on Wednesday’s council agenda, which he views as essentially a “housekeeping item,” as a way to open a council discussion on utility license fees for water and sewer services.

Though such fees are allowed by the city charter, “that doesn’t automatically mean it’s good policy,” Fish says.

“I think it’s time to take a fresh look at the way we structure our utility license fees,” Fish says. “I want to have a council discusson of next steps.”

Steve Law can be reached at 503-546-5139 or This email address is being protected from spambots. You need JavaScript enabled to view it..