How Much Does EDIT Sewer Subsidy Cost You?

Posted: March 14, 2010 by NewAlbanist in Uncategorized

I’m going to try to replicate a valid but dated analysis of the folly of using EDIT to prop up sewer rates that Jeff Gillenwater provided a few years ago during a similar contretemps.

With 38,000 residents (probably 12,000 households) in New Albany paying $2.9 million in EDIT, it can be useful to determine just how much it costs to use EDIT to subsidize sewer rates.

(EDIT = economic development income tax; currently a 1.5% flat tax on all income from dollar one)

Excluding children, who generally do not earn incomes or pay taxes, we can reduce the number of payers (my guess) by about 9,000 to 29,000. Subtract from that non-working spouses, and we’ll call it 24,000. Subtract from that the large number of non-working poor, and it’s 20,000. The official unemployed reduces the number to 18,000 EDIT payers. The unofficial unemployed reduces the count to 17,000 payers. Assume with me that there are 500 people existing in the black market and we have 16,500 people in New Albany paying EDIT.

(I really don’t think the number is that high, but bear with me.)

Coincidentally, there are 16,500 accounts paying charges to the New Albany sewer utility.

Assuming those numbers are correct, the average payer of EDIT to the city pays $175 a year. (Again, I think the number of people is lower, so the amount would be something higher.)

More than 3,000 of the utility’s accounts are outside the city, so we know they aren’t paying EDIT to the city. I’ll take a wild guess and say there are 2,500 business accounts in the city, most of which don’t pay EDIT to the city.

Under this analysis, then, 16,500 New Albany residents pay $175 a year. Let’s say that includes 5,000 accounts (the others don’t have EDIT income.) So for each city household paying the tax, their total EDIT payment is $542.

Right now, 30 percent of that $542 ($163) is going to keep rates lower for the 5,500 accounts that don’t pay EDIT to the city.

Our personal sewer bill, right now, is about $330 a year. Our business sewer bill is similar, but since ours is a sole proprietorship, we don’t receive a subsidy like incorporated businesses. So, my household is paying $163 a year to keep rates lower for people who don’t pay EDIT taxes to the city. And my business is paying $163 a year for the same purpose.

How much would it cost the ratepayer to just pay the cost of the service?

On average, if every ratepayer account paid $53 a year more, those 5,000 accounts (households) would see their $163 returned to city services, not subsidies.

Given the legal rate structure, city residents would pay about $48 more. Accounts outside the city would pay about $72 more. A year.

For a city account, the sewer bill would be 53 cents more per unit of water used. Outside the city, the sewer bill would be 80 cents more per unit.

But instead of having the users of the utility pay for what they use, the current rate structure has 30 percent of ratepayer households, all working families inside the city, pay $115 a year more (or, in the alternative, sacrifice $115 in expected city services) so that people and businesses living outside the city can save $72 a year, and every other ratepayer can save $48 a year.

Why are you (a city EDIT payer) paying (or sacrificing) so much for so little? You (on average) are paying (or sacrificing) $163 to reduce your sewer bill by $48.

Comments
  1. newalbanist says:

    Short summary: Using EDIT subsidies is more than 3 times as expensive (to city residents) as just having the users pay for what they use.

    I cannot figure out how the Coffey-Gahan-Price-McLaughlin plan to increase EDIT is being accepted by their constituents unless their constituents don’t have jobs. Surely a majority of their voters have jobs, right?

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