Summary
To: Mayor and Commissioners
From: Town Staff
Date: 3/8/2022
______________________________________________________________________
Subject:
Title
Second Reading Ordinance 543 - Municipal Public Service Tax
Summary:
This ordinance amends Chapter 54, Article IV of the code to include the levy of a public tax on the purchase of water service. The Town is presently considering the sale or transfer of its water system, and approval of this ordinance would allow for the tax should a system sale or transfer occur in the future. This ordinance would become effective only in the event of a sale or transfer, and notification to the Department of Revenue would be required 120 days prior to the effective levy date. The levy can’t be effective until any January 1, April 1, July 1, or October 1 which follows the Town’s notification to DOR..End
Body
Previous Commission Action: First reading approved on February 15, 2022. The Commission previously declined to impose a MPST on the Gas utility, but discussed wanting to evaluate a potential levy on water if the utility were transferred or sold.
Background/Problem Discussion: Section 166.231, Fla. Stat., permit municipalities to levy a public service tax on the purchase of water service. This would be an additional revenue source in the event of a sale or transfer of the water system. A Municipal Public Services Tax (MPST) is a levy on gas utility, electricity or water utility sales that cities and towns in Florida may adopt for their jurisdictions. The maximum allowed levy is 10% and may not be applied to any “fuel adjustment charge”, meaning any rate increase passed along to customers resulting from fuel cost increases affecting the utility provider (F.S. 166.231)
The Town currently has a MPST levy of 10% for sales of electricity by Duke Energy. This is one of the revenue sources dedicated to service the bonded debt in the Infrastructure Fund. Additionally, the Town has the option to set an MPST of up to 10% on eligible non-fuel charges for water and gas services. Other communities in Pinellas County have MPST levies on gas and water. With respect to water sales, 14 out of the 24 municipalities in Pinellas County have levied a MPST and all but two of these communities have the maximum 10% levy. Charts are provided for reference purposes.
The MPST for water would serve as an alternative revenue source for the Infrastructure Fund. Proceeds from a water MPST can provide an additional buffer for fluctuations in other revenues such as Penny for Pinellas, Electric Franchise Fees and State Sales Tax. As all of the Town’s major roadway and drainage projects have included utility line replacements, this funding source would ensure that those additional costs are adequately funded despite other revenue challenges anticipated in the long term CIP.
Additionally, the Strategic Plan process found addressing infrastructure challenges to be the main priority for the community. Extending MPST levy to the water utility would also reinforce the financial standing of the Town by maintaining its borrowing capacity amidst receding investment returns and state revenue sources. Although the Town is still considering the long-term future of the Town’s water supply, the Town may retain the levy and continue to receive MPST revenues in the future regardless of which entity manages the Town’s water supply.
Expenditure Challenges N/A
Financial Implications: In a county-owned scenario, a 10% MPST applied to water base and usage charges could equate to an increase of $2.05 per customer per month for those single-family residences using 4,000 gallons. The cost would increase by $0.513 for each additional 1,000 gallons. Most residences average less than 11,000 gallons per month. Estimated revenue from a 10% MPST on water would be in excess of $150,000 annually.
Recommendation: Staff recommends approval.
Proposed Motion Move approval of Ordinance 543 on second and final reading.