For much of the past decade, financial decisions involving Gainesville Regional Utilities have forced elected officials to choose between bad and worse.
The Gainesville City Commission now faces another poor choice when it comes to finding the right combination of interest rate hikes, property tax hikes, and cuts in government services to balance the city budget. Commissioners should prevent the GRU’s already high electricity tariffs from spiraling out of control by more aggressively refraining from relying so heavily on utility revenues.
The income from the urban GRU currently finances around 30% of the city’s state budget. The proceeds help pay for law enforcement and other services in a city where more than half of the property is exempt from tax, as the University of Florida and other government agencies own the land.
The transfer leads to a tug-of-war between city commissioners and GRU officials. Typically, GRU officials seek to raise more revenue to boost utility operations and pay off debts, while commissioners try to keep the transfer as high as possible to avoid budget cuts and property tax increases.
This conflict was exposed recently at a meeting of the commission discussing the transfer of the GRU. With the $ 38.3 million remittance in fiscal 2021, commissioners will need to reduce the amount over the next year to support the GRU’s budget and prevent significant increases in utility costs.
An external consultant presented the commissioners with a report on the consequences of different transmission reductions. A plan backed by the GRU would reduce the transfer by more than $ 10 million in 2022, while the consultant set out an alternative option to cut the transfer by approximately $ 2 million.
The alternative option would increase GRU electricity tariffs by 7%, wastewater rates by 5% and gas rates by 3%. GRU electricity tariffs are already among the highest in the state, so such increases would make it even more difficult for lower-income residents to afford their bills and should be avoided.
Reducing the transfer by more than $ 10 million would require a smaller increase in utility costs, but would also mean an increase in property taxes and possible cuts in city services. A report from city officials found that such a reduction would require a property tax increase that added about $ 215 to the annual bill of a $ 200,000 home.
The GRU transfer has helped the city keep property taxes artificially low for too long. The millage rate calculated in Gainesville is currently around two-thirds of the level recorded in the unincorporated Alachua County. However, the GRU preferred reduction in transfer would be a 27% cut and would be difficult to achieve in a single year. Therefore, a step-by-step approach makes sense.
A cut between the two options would be a better avenue for next year as property tax increases and budget cuts are used to keep utility bills in check. The Commission unfortunately voted 4: 3 at a meeting on Thursday to move forward with the option that would lead to a 7% increase in electricity tariffs. However, there is plenty of time to reconsider this before the budget hearings for this summer.
The commissioners must also plan to further reduce the GRU transfer in the coming years. Unless the city stops relying so heavily on transfers to fund government services, the Commission’s financial decisions will only get worse in the future.