Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, December 16, 1994 TAG: 9412200016
SECTION: EDITORIAL PAGE: A-22 EDITION: METRO
SOURCE: AARON SMITH
DATELINE: LENGTH: Medium
According to the mayor, this rate increase is necessary so that Salem's users of the water and sewer system can pay for a $10 million bond issue to cover Salem's share of improvements to the regional sewage treatment plant.
The fact that a bond issue is required to pay for needed sewage treatment plant improvements is no outrage. The outrage is the decision that there be a sewer-rate increase. If Salem wisely uses cash profits from its utility operations, there's absolutely no need for any increase.
All Salem citizens know there are electric, water and sewer charges in their monthly utility bills. However, most do not realize that Salem's electric, water and sewer departments together generate significant cash profits. And even fewer citizens are aware that these cash profits are used as a tax source to fund city operations outside the utility departments.
On Sept. 27, 1976, Salem City Council passed a resolution allowing cash profits from utility departments to be transferred to the general fund. This fund provides money for several fundamental municipal services, including public safety, public works, general government administration, parks and recreation, and judicial administration. Starting with the 1975-76 fiscal year, $14.1 million of cash profits has been transferred from the utility departments to the general fund.
What is the problem in transferring utility profits to the general fund, if the money is needed? The general fund already receives so much tax income that utility cash profits are an extravagant luxury. Excluding the utility-profit transfers and any bond receipts, general-fund cash income has increased 335 percent, from $7.9 million in 1975-76 to $34.2 million in 1993-94, while inflation was only 163 percent. This increase in general-fund income, at more than twice the rate of inflation, is particularly significant when one considers that Salem's population has increased less than 1 percent since 1975-76.
Will cash profits from our utility departments be sufficient to pay for the $10 million bond issue without a sewer rate increase of 35 percent? Absolutely. For the 1993-94 fiscal year, utility departments had a cash profit of $1.2 million, of which $935,000 was transferred to the general fund. If unneeded general-fund transfers cease, there'll be enough utility profits to cover annual payments of a typical $10 millon bond issue.
Annual payments for the $10 million sewage-treatment-plant bond, which will be issued in 1995 or 1996, can be estimated using another $10 million bond issued by Salem on Nov. 22, for school improvements and the new baseball stadium. The Nov. 22 bond issue was for 18 years at 6.3 percent interest, with principal and interest payments varying each year from $636,000 to about $1.2 million. Annual payments of this magnitude can clearly be covered by future utility cash profits without a sewer-rate increase!
A 35 percent rate increase means that my Salem utility bill will increase by about $40 a year. Anyone questioning the significance of this amount need only talk to a retired person on a fixed income. The greatest outrage of all will be if my fellow Salem residents allow the sewer-rate increase to be imposed.
Aaron Smith of Salem is treasurer of the Salem Taxpayers Association.
by CNB