Safford looking to diminish increase by utilizing sales tax; Thatcher residents could pay less
By Jon Johnson
SAFFORD – Like the ocean, Safford water rates are going to rise and there’s not much anyone can do about it. The increase could be mitigated, however, if Safford and Thatcher move forward with a plan to utilize sales tax revenues to offset the necessary increase.
At a council work session Sept. 25, Safford City Manager Horatio Skeete informed the council that the city was looking at having to raise its water rates by 5 to 6 percent in January or February 2018 and then another increase of 13 to 15 percent in 2020 to pay for $20 million in capital infrastructure improvements to the water system in the city’s five-year plan. One of the projects planned is the replacement of the water line along Church Street to be done in conjunction when Thatcher does its road replacement next year. Skeete said it would be beneficial to perform the work at the same time so Safford wouldn’t have to cut the new road and replace it. However, to pay for the projects, he said water rates must increase.
“The current rates that we have cannot support those projects,” Skeete said.
According to Skeete, Safford has 60 miles of pipe that is more than 50 years old and in need of replacement. He said the bill of not taking care of the water system in the past has now come due and it is up to the people of the present to pay for the sins of those in the past. His plan calls to take out loans over the coming years to perform large infrastructure repairs.
“We have been behind for quite some time,” Councilor Richard Ortega said. “The sad part about it is this is the only way that you can start getting things done.”
There might be a way to lessen the rate increase, however, if the municipalities utilize sales tax revenues for the water infrastructure costs, Skeete said.
He recommended withdrawing the 10 percent premium Thatcher residents pay on top of the basic rate Safford residents pay and instead have the town of Thatcher kick in two-tenths of its 2.5 percent sales tax revenues instead, which would come out to an annual payment of about $175,000. Skeete recommended Safford do the same, which would add about $350,000 to the coffer. Thatcher residents previously paid a 25 percent premium prior to 2010, when the municipalities amended a 1955 water agreement and settled on the 10 percent differential. That was also when Safford withdrew sharing sales tax from Walmart, that previously was located in Thatcher before moving to its Safford building. Water users in the county still pay the 25 percent differential on the basic rate.
If the municipalities decide to utilize the sales tax option, the rate increase would be lowered to 3 to 4 percent in January or February 2018 and 5 to 6 percent in 2020, according to Skeete.
“I don’t want to have to pay any higher rates than I have to,” Skeete said. “I don’t want anybody else to have to either . . . If we could lower it, we should lower it.”
By giving Thatcher residents a break with their town picking up the slack by utilizing sales tax revenues, Safford would increase the amount it gets from Thatcher by $40,000 to $50,000 annually without any increase because the city currently collects between $125,000 to $135,000 from the 10 percent premium annually and the estimated amount it would get from Thatcher’s sales tax is about $175,000 annually.
Skeete added that if sales tax revenues increased by more than 5 percent, they would adjust the numbers so the municipalities weren’t paying an inordinate amount and that only uncommitted sales tax revenues would be allowed to be allocated to the new fund that would be created. Additionally, if Thatcher decides to not join in on the program, the rate increase for Safford residents could still be lessened by the city utilizing its sales tax and Thatcher residents would still have to pay the 10 percent premium on top of whatever the increase would be.
Skeete added that he offered the same deal to Graham County but that the county leaders said they would not be able to afford to utilize its sales tax revenues that way. County residents currently pay a 25 percent premium over what Safford residents pay for their water.
“They assured me that they have no source of revenue to contribute to a structure like this,” Skeete said. “So, unfortunately, they said ‘you’ll have to continue to charge the 25 percent premium to county residents.’”
The consensus of the council was in favor of the move, not only to lessen the increase residents will have to pay but also because of the spirit of working together with the town of Thatcher.
“It shows community togetherness,” Safford Mayor Jason Kouts said. “It gives the town of Thatcher a spot at the table in helping decide the projects. It makes them feel like their money is being represented.”
Councilor Chris Taylor echoed Kouts’ remarks and said he liked the two municipalities working together.
“I also like the idea of not making the citizens now shoulder all the burden but to pass it along to people who will be using it in the future as well,” Taylor said.
The only dissenting opinion came from Councilor Steve McGaughey, who was in favor of working with Thatcher but wasn’t in favor of taking loans to pay for infrastructure projects because he said paying interest was wasted money. Skeete informed him that taking the loans and then utilizing money from the newly formed fund to pay for the loans was a better way to go than attempting to pay as you go because the city wouldn’t be able to do as much and could end up paying more by not being able to perform infrastructure changes in a timely manner. He also added that if there was a catastrophic failure, the city wouldn’t be able to fix it if it didn’t already take the loans out and had the money available in its coffers.
“If we only have $2 million in the bank and $4 million worth of pipe was to break in the next two years, we can’t do anything about it,” Skeete said. “We will be back to duct tape . . . So, it’s a dangerous system in my mind, professionally. What I’m proposing is what I think is a reasonable solution. The majority of utility companies across the country utilize it to fund long-term infrastructure.”
Skeete will draft his proposal to utilize the sales tax to minimize the water rate increase and will bring it back to the council for approval.