PILT: Phased out?

Council has yet to consider codification

Voters may have believed that by approving Issue 300 they had put an end to payment in lieu of taxes, or PILT, from utilities to the city’s general fund, but that might not be the case.
A draft codifying Issue 300, deferred from the City Council’s regular meeting this week rescheduled for Feb. 23. If approved, it would allow city council to charge utilities for basic city services.
The PILT was phased out by voter approval of Issue 300 during last November’s election, but has been an integral part of the city’s budget for decades.
Averaging $25 million each year during the last decade, PILT payments for Colorado Springs Utilities have accounted for more than 10 percent of the city’s general fund revenue.
Noting that 300, an initiated ordinance, directly conflicts with several provisions of the city charter, the draft says that “based on language from the factual summary (provided to voters) by City Council concludes that the electorate intended Issue 300 … to authorize the exchange of assets between enterprises and the city for consideration.”
The city charter is the municipality’s governing document. Ordinances that conflict with the charter, whether initiated or not, cannot become law.
The draft attempts to reconcile the unambiguous language of 300 with several provisions of the city charter that 300 may violate. If approved, the codified ordinance would diminish 300 and empower future councils to require cash payments from Utilities for “police and fire services and street and traffic services.”
During 1924, Colorado Springs voters amended the city charter to permit the creation of a municipally owned utility, which would acquire the assets of the private companies that had previously served the city. In so doing, the voters also empowered the city to transfer any “surplus” from utility operations to the city’s general fund.
The charter doesn’t define “surplus.”
But Springs Utility PILT payments are made possible by that charter provision.
“PILT was created 40 years ago,” said Springs Utilities CEO Jerry Forte, “because (city leaders) realized that although water and wastewater services are traditional municipal services, gas and electric are in a different category, and that the use of public rights-of-way ought to require some compensation, similar to a franchise fee that a city would receive from a private company providing the same services.”
Private companies not only pay franchise fees, but also generate property, sales, and use tax revenue for local governments.
Despite being the second-longest serving member of council, after Randy Purvis, Vice Mayor Larry Small is still somewhat baffled by PILT.
“I don’t know how they ever established it,” he said, “but it compensates for a lot of taxes we don’t collect. If we had a for-profit utility, for example, we’d be collecting use tax on that big pile of coal next to the power plant.”
“The PILT is a very general concept among municipal utilities across the country,” said Springs Utilities CFO Bill Cherrier, “It typically amounts to about 3 percent of utility sales within the municipality.”
In common with other municipalities, Colorado Springs doesn’t share its PILT with other local jurisdictions. In theory, it might appear that since school districts and El Paso County would benefit from taxes paid by an investor-owned utility, they should be compensated by PILT as well.
But, Cherrier pointed out, other jurisdictions are aware that the generally lower rates of municipal utilities more than offset any possible PILT share. School districts, which must heat, cool, and light dozens of buildings are particularly vulnerable to the threat of higher rates, and understandably reluctant to rock the municipally owned boat.
In the factual summary provided to voters during the November election, voters were advised that “… prohibiting enterprise payments to the City results in taxpayers subsidizing enterprise customers… if the enterprise were a investor-owned utility it would pay sales and use tax, property tax, and a franchise fee to the city. If an enterprise is not expected to contribute at all to the provision of municipal services from which it benefits (it benefits from police and fire protection, infrastructure, etc.), then the citizens are subsidizing the enterprise.”
The measure’s author, Douglas Bruce says that Issue 300 is “self-executing,” and that no codification is necessary.
Asked whether Council is likely to approve the city attorney’s draft, or take Mr. Bruce’s advice and leave well enough alone, vice Mayor Larry Small was non-committal.
“I don’t know,” he said, “I’ve learned never to predict what Council may or may not do.”