Bladine: City should resist utility surcharges

Surcharging McMinnville water bills to finance general government services is a topic featuring many numbers requiring complex calculations. One simplification would be to declare it a bad idea and move on.

For 135 years, McMinnville Water & Light has jealously guarded its mission to provide lowest-cost, highest-quality municipal utility services possible. W&L’s ability to protect water and electricity rates lies in its own governmental charter, giving its commission near-total power over utility operations.

The city council appoints W&L commissioners, but there always has been a clear separation of administrative authority, coupled with admirable cooperation in serving many community needs.

Forty years ago, the city council briefly coveted potential revenue streams from W&L’s expansive watershed resources. Back then, the mayor broke a 3-3 council tie to ensure W&L dollars would remain dedicated to building, maintaining and managing water and electricity systems.

Elsewhere, Oregon cities saw and acted on the allure of easy money from utility bill surcharges to cover general government shortfalls. Utility ratepayers challenged those surcharges, calling them property tax equivalents in excess of constitutional limits.

However, in 2007, the Oregon Supreme Court said utility surcharges are not equivalent to property taxes if they are not made subject to a legal lien on property owners.

In 2014, the city of Newberg cited that case when it funded two communications officers with a surcharge of $2 per month on household water bills.

Using a residential meter equivalency scale, Newberg’s surcharge ranged from $2 to $530 monthly, based on size of the meters. Those fees are much higher today, and Newberg has added utility surcharges to help fund city public safety and transportation programs as well.

McMinnville leaders want to fill a general fund budget shortfall with $2 million of utility surcharges and franchise fees — mostly on water, but also on electricity. That budget shortfall has become chronic in recent years, while general fund employee counts rose from 150 FTE in 2016-17 to budgeted 190 in 2021-22 (up 27%), and related personnel costs increased from $15.3 million to budgeted $23.5 million (up 54%).

Why are utility surcharges a bad idea? They simply represent a tax by another name.

Unbound by legal limits, they are an easy, never-ending temptation to finance more government without public restraint, and the public will be reminded of that every month on every utility bill.

Water & Light officials know this well. They understand the historic and future importance of maintaining a financial wall between general city budgets and municipal utility services.

Jeb Bladine can be reached at jbladine@newsregister.com or 503-687-1223.