Paying your utility bill every month should be a fair exchange between you and the city within which you live. However, many cities in Utah tack on additional fees on top of your bill for electricity, water, and sewer services, too often without voter input. Instead of having city councils approve numerous fees for non-traditional services, city governments should propose a transparent tax to be more accountable to voters.
What sort of additional fees are added on to your utility bill? One of the most common are associated with meter readings and residents shouldering the costs of continued services for decommissioned buildings on the federal and state level. These fees are often seen in cities with older infrastructure or lots of government-owned property, but add-on fees to your monthly utility bill are different. Add-on fees are charges to residents for unquantifiable services that most cities use to avoid proposing a tax hike to their constituents.
The fees that cities in Utah charge their residents on a utility bill should be in exchange for a specific service with a specific benefit for the resident. For example, most Utahns pay the municipality for access to the sewer system. This is a fair market exchange: residents pay the city in exchange for the use of this public service. However, residents are sometimes charged additional fees for services that they themselves might not use or for which the city cannot keep track of their use. This leads to the utility bill being used to cover costs of roads or other parts of public infrastructure.
The problem with this practice is that it undermines the important difference between a fee and a tax. Fees are payments in exchange for a quantitative public service while taxes cover the remaining immeasurable services that benefit society as a whole. If cities want to pay for their roads or other projects, then city leaders should propose a tax hike to their constituents instead of adding on fees to every family’s utility bill.
Fees for things like cemeteries, recreation, and public safety are charged to residents of several Utah cities, even though residents might never use the related service; their use is not quantifiable, like electricity or garbage service, and therefore cannot be assessed through a fee. Public officials should not be dodging the unpopularity of a tax hike proposal by adding fees for services where the amount of use cannot be tracked.
This practice of add-on fees has been increasing since last year, with 41% of American adults reporting they had experienced a hidden or extra utility fee.
In Utah, Pleasant Grove created a Transportation Utility Fee to cover the costs of roads. Other cities across Utah including Provo, Highland, Vineyard, and Mapleton all have similar fees attached to their resident’s utility bills. Fortunately, a Utah judge ruled this spring that Pleasant Grove’s Transportation Utility Fee was in fact a tax and was collected illegally by adding it on to the residents utility bills. Because fees “go toward specific, quantifiable services that residents pay for,” adding additional fees for indirect services that residents may or may not have used is not only illegal, it circumvents the process of proposing to the citizens of a city a new tax or tax increase.
In order to ensure that the government remains accountable to the people, homeowners should determine if they are being billed for services unrelated to their utilities. Though the recent Pleasant Grove case is being appealed, it would be wise for local governments to provide quantifiable services in a fair market exchange. Otherwise, general taxation using property, income, or sales taxes is the proper way to pay for these services.
The collection of funds necessary to cover the costs of infrastructure, pet projects, or new city initiatives must be put forth to city residents as a transparent tax, not a fee. City leaders should instead propose a tax hike to the residents and explain what costs the new tax or tax increase would cover. The process of proposing new taxes keeps the government transparent and accountable to those required to pay. City leaders should remain accountable to the citizenry by proposing a new tax instead of adding fees to utility bills. This process ensures a transparent government and a respect for each citizen’s wallet.
Roy Mathews is a policy research intern at Libertas Institute.