By D. L. Norris
From taxhistory.org, there are “four ways governments extract money from persons: 1.) taxes, including special assessments and franchise and privilege license taxes 2.) user fees 3.) civil regulatory penalties 4.) criminal penalties”
Both taxes and fees were created by the government to raise revenue so why the need to separate the two out? Additionally, what differentiates them?
Well, again from taxhistory.org “as the public became increasingly resistant to tax increases, the government came up with the user fee. Economically, it’s all the same to the government but optically it looks better to the electorate for taxes not to be increased.”
According to the Mackinaw Center for Public Policy, Lawrence W. Reed explains the difference between a user fee and a tax: “When someone chooses to use a government service and must pay for it, he’s paying a user fee. Furthermore, what he pays should cover the cost of the service he’s receiving; if it also pays for something he isn’t getting or doesn’t want, then he’s paying both a user fee and a tax. Taxes differ from user fees in that paying them isn’t a matter of choice and what you pay is not tied to what you get.”
So, for one last attempt at clarifying the difference between the two and with help from the Michigan State Supreme Court, a user fee is designed to defray the costs of a regulatory activity or government service, while a tax is designed to raise general revenue. A true user fee must be proportionate to the necessary costs of the service, whereas a tax may not be. And, a user fee is voluntary, whereas a tax is not.
Clear as mud? Only a lawyer/politician could come up with circular language to conceal and distort the true meaning and purpose of a word or two.
Back at the August 17, 2021 Okaloosa County Board of County Commissioners (BOCC) Regular Meeting, the BOCC voted to continue a Public Hearing at the September 7, 2021 BOCC meeting for the adoption of a Replacement Water & Sewer Ordinance. The continuance was to have staff : 1.) consider the ordinance language mandating water/sewer connections and, 2.) consider the option of increasing the 5-year rate plan from 2.5% increase per year to 3.0% per year.
The first item was not contentious and everyone agreed to the language changes aligning the ordinance with Florida Statutes. The concept of mandatory connections comes from Florida Statutes, which actually allow up to 365 days to connect but mandates connection if service is available.
But wait a minute, water & sewer charges are extracted from the public as a user fee and user fees are supposed to be voluntary; but, if water & sewer are available, the state mandates the property owner must hook up and pay the cost. If one does not volunteer to hook up, but are forced to by the state, wouldn’t that make the charge a tax and not a user fee?
District 1 Commissioner Mixon asked staff when the last time was that the county forced someone onto our sewer services. Staff stated “we don’t have sewer police so we have actually never forced anyone to connect. Now, we have placed liens on property and we have charged people sewer when they weren’t connected which kind of makes it a fine that they pay every month because they are paying for a service they aren’t using. But, we have never actually forced anyone to connect to our sewer.”
Remember what the Michigan State Supreme Court said, “a user fee is voluntary, whereas a tax is not.” Staff just admitted that the county is placing liens and fining residents who are not tied into the county water & sewer system when available to them. That sounds like a punitive tax to me. How many Okaloosa County residents are being discriminated against for this punitive tax? More importantly, why has no one from the BOCC challenged the Florida State Legislature on this? Any representative who claims to be conservative should be fighting back on this for all their constituents; however, not one of the five county commissioners cried foul on this “heavy hand of government” issue.
The second item the BOCC wanted the staff to look into at the original Public Hearing was increasing the user fee rate from 2.5% to 3.0%. Staff had proposed a 2.5% rate increase annually from 2021 to 2025 and, throughout the meeting, staff continued to confirm that all they needed to sufficiently execute their 5-year plan was a 2.5% increase. However, the BOCC had asked them to present the numbers for a 3.0% increase.
If the staff (executive branch) originally asked the BOCC, the legislature, for a 2.5% rate increase deeming that sufficient for the next five years, why in the world would the BOCC, who is supposed to represent the taxpayers, ask the staff to raise the rate even higher to 3.0%? What average taxpayer in Okaloosa County asked for that additional increase?
According to staff, increasing the user rate by 3.0% per year provides an estimated amount of almost $2.5 million total from FY 2022 to FY 2026, above and beyond the previously proposed rate plan. To accomplish this 0.5% increase, beginning with October 2021, 0.5% of each month’s normal customer operating revenue would be transferred to a restricted account, for money to be set aside for future water and/or sewer expansion projects in the north or south end of Okaloosa County. A 2.5% rate increase would increase the average monthly bill by $1.65 for FY 2022. The additional 0.5% increase for expansion projects would result in a monthly bill of $0.33 for FY 2022.
There was no one from the public who spoke on this issue during the Public Hearing so District 3 Commissioner Boyles made a motion “to adopt the ordinance as presented with all revisions presented to include the 3.0% annual escalation with the segregated account for capital improvement projects and also the clarification items that came out of some concerns that Commissioner Goodwin had.”
District 1 Commissioner Mixon seconded the motion and discussion ensued.
The two lawyer/politician commissioners, Goodwin (Dist 4) and Boyles, made sure to state the requested 2.5% increase and additional 0.5% increase were user fees and not a tax which appeared to justify them in requesting more money be taken out of the taxpayers pockets than originally requested by staff. A third commissioner, Mixon, struggled a bit in his justification but did state the requested increases were user fees and not taxes. He’s a pastor and not a lawyer but he joined right along side of the lawyer/politicians and requested more money be taken out of the taxpayers pockets than originally requested by staff.
For anyone with basic math skills, the 2.5% increase originally asked for will raise the average monthly homeowner bill by $1.65. The 3.0% increase will add an additional $.33 to the 2.5% increase for a total average monthly homeowner bill increase of $1.98 which comes to an additional increase of $23.76 to the average annual bill.
That’s a significant increase in the average annual water & sewer bill, especially in an inflationary/COVID economy we are currently in. Also, it is creating a fund within water & sewer not earmarked for a particular expenditure (general revenue) which would make it a tax.
District 5 Commissioner Ponder and District 2 Commissioner Ketchel spoke in opposition to the additional 0.5% increase. Both commissioners stated the Enterprise fund was solvent and doing well and praised staff for their excellent oversight and leadership. Both commissioners also pressed staff to confirm the 2.5% rate increase includes future planning for expansion and that the 0.5% additional rate increase would just be an extra pot of money and not earmarked for anything in particular. Repeatedly staff confirmed they did not have a specific project within their 5-year plan that required the 0.5% additional rate increase.
Commissioner Ketchel then stated “So the additional amount is really not necessary unless we want to put money aside but you know with COVID being what it is…I hear the words of my father in my head, government is always trying to find a way to get into our pockets. So, I’m not going to be able to support the additional increase because I feel like we’re doing so well with the Enterprise and the increase [2.5%] will take us there.”
As the obvious sponsor of the 3.0% rate increase request, Commissioner Boyles praised the staff for doing a “phenomenal” job at managing the Enterprise; but, viewed the 5-year 2.5% rate plan as maintaining the existing system (even though staff previously stated future expansion is included in the 5-year 2.5% rate plan) and was advocating for the 5-year 3.0% rate plan to allow for future growth and expansion of the water & sewer system. Commissioner Boyles viewed the additional increase of 3.0% as a means of deterring a “heavy handed governmental approach” through zoning to control sprawl in the future.
But wait a minute, isn’t increasing user fees (taxes) on a segregated portion of the entire county without a justified need also a “heavy handed governmental approach?”
District 4 Commissioner Goodwin stated he “would support the 5-year 3.0% rate plan, if and only if, the top priority of the restricted fund was to shore up and improve the county lift stations to “achieve a zero lift station, zero spill into our coastal waterways from our (sewer) systems.”
Staff then stated “we have in our CIP significant funds to rehab lift stations, we have a plan.” Confirming once again the 0.5% increase is not necessary.
Without confirmation from staff that the 0.5% additional rate increase restricted account would be earmarked by ordinance for shoring up and improving the county lift stations, Commissioner Goodwin stated he would not support the 0.5% increase and that he “was more of a 2.5% guy.”
This lead Commissioner Boyles to withdraw his motion as it was obvious he did not have the majority of votes needed to win. However, he did make a new motion similar as before with 3.0%, with additional amended language already discussed but added that 1/4% [of that 0.5% additional increase] be directed to future expansion and 1/4% be dedicated to accelerating the process of fortifying our south county sewer infrastructure to ensure we are not resulting in spills into south county water bodies.
Commissioner Goodwin seconded the motion and a vote was taken. The motion passed by a 3 to 2 margin. Boyles, Goodwin and Mixon voted yes and Ponder and Ketchel voted no.
You can bet that not a single homeowner asked for this additional increase in user fees (taxes) to their upcoming water & sewer bill especially to sit in a restricted account. At one point, Commissioner Boyles tried to use a possible county take over of the Niceville Valparaiso sewer plant as justification for the need to have a restricted account; but, staff stated again that they have already included that in their 5-year planning of the 2.5% rate increase request. So why were Commissioners Boyles, Mixon and Goodwin pushing so hard for an additional rate increase that staff repeatedly stated wasn’t necessary?
In a previous post on this blog, in the December 2019 archives, titled Okaloosa County’s Crestview Bypass, The Proverbial Cart Before the Horse, there was discussion of projects #11 and #12 of the Crestview Bypass project that will create two new roads that will open up 2,000 acres of undeveloped land for future commercial and residential development. That undeveloped land will need water & sewer connections; however not a single commissioner mentioned this as a future expansion need which seemed very odd.
The Crestview Bypass projects #11 and #12 were definitely the 800 pound elephant in the room during the September 7, 2021 BOCC discussion; and, as such, would make the developers who will earn a fortune developing those 2,000 acres, the 800 pound gorilla in the room during the same meeting.
Those developers are the top campaign contributors to both Boyles’ and Mixon’s political campaigns from 2020. Those facts can be found at both the Okaloosa County Supervisor of Elections website or, in a previous post on this blog, in the January 2020 archives, titled Okaloosa County, Ring in the New Year and Ring in a New Board of County Commissioners! One top developer and campaign financer is also a client of Commissioner Goodwin.
If the developers are going to need new water & sewer infrastructure, why doesn’t the county leverage impact fees from them to pay for some of the expansion costs? Florida statutes allow for impact fees to be assessed so why not share the burden more fairly with the developers instead of just off the backs of those who already have existing water & sewer connections?
Once again, our local government aligned with big developers and stuck it to the little guy: the average home owner, the blue collar wage earner, the retirees, etc.; and, all under the guise of a tax renamed a user fee. I’m sorry but a tax by any other name is still a tax.
You can contact the author at dlnorris@theparadisepatriot.com