City Limits PILOT Payments for Water Department
Left, city crews had to replace a burst water main on Church Street just before Christmas 2013. To date the city has replaced four burst water pipes throughout the winter, which only raises the value of the water utility infrastructure. (City-Times photo)
By Brandi Makuski
After years of instability, the water utility’s annual PILOT payments have now been capped, something city leaders say is for the benefit of Stevens Point residents.
Water Department Director Joel Lemke said his department has been paying $860K-$880K in PILOTs (payment in lieu of taxes) annually- a cost that’s passed on to city water customers. The city last week approved capping that PILOT payment at $870K per year.
“We’re looking to stabilize those rates,” Lemke said. “Statewide, water rates are about 17% of a water utility’s expenses for the year. Ours are 20, 21 (percent). We’re a little higher and a lot of that is due to recent construction that has a very high value, Well 11 being the obvious one.”
Lemke said every time the city replaces water pipes or equipment, the value of the water utility infrastructure increases. Rising costs of new pipes and construction materials, he said, in turn raise the rates for water customers and increases the PILOT amount for the department.
“We’re retiring the infrastructure at sometimes less than a dollar per foot of pipe and sometimes putting it back in at 130 dollars per foot. So it’s an increase of, sometimes, a hundred fold and it just keeps going up every year,” Lemke said. “One of the concerns I have for our customers and our department is keeping those rates steady.”
City Comptroller-Treasurer Corey Ladick said the PILOTs are in place for various nonprofit or municipally/state-owned entities. The PILOT’s are necessary, he said, because those entities- like the water department, housing authority and university- are exempt from paying city taxes but still benefit from city services such the fire department and municipal street services.
“The story with this is, it was originally created by the public service commission and the intention behind it was they didn’t want public sector utilities to have an unfair advantage over private sector utilities,” Ladick said. “Of course, that line of reasoning is somewhat obsolete because we don’t really have private sector water utilities anymore and it’s not really something we’re ever likely to see again.”
Ladick said there’s no annual increase in the PILOT payments and the water utility infrastructure isn’t assessed on any regular basis, but rather based on the value of the equipment at the time is was installed.
“You’re literally talking about every well, every pipe in the ground,” he said. “Basically, the pipes and the infrastructure is valued based on the original cost at the time it was installed. If I have a pipe from 1942, that pipe is valued at the original cost in 1942. If you replace that with a 2014 pipe, you’re now jumping from the 1942 price to the 2014 price, so of course that’s a significant jump and that does increase the amount of the PILOT just because the value of the infrastructure goes up significantly. Well 11 was a significant addition to the water utility.”