What is taking so long? In January, the city of Elkhart changed the way it charged some (not all) outside utility customers. This fee is known as the compact fee, or Payment In Lieu of Taxes (PILOT). The outrage of these customers facing new rates caused the community to re-evaluate the entire program, and rightly so.
Mayor Dick Moore proposed a reduced fee ordinance, then another reduced fee ordinance, followed by a third after a task force met to advise him. The Greater Elkhart Chamber of Commerce has been engaged since the beginning and offered some additional suggestions.
The City Council has been very aware of the issue. Angry business owners have been attending meetings for months. For at least two months, legislation has been in the hands of the City Council. So, where are we now? Exactly where we started.
We understand the PILOT issue is complicated and shouldn’t be rushed. It’s not rushing to expect a solution within six months. The Chamber membership includes companies both on the old and new PILOT fees, and well as businesses inside the city with an entirely different perspective. Our membership also includes the city of Elkhart, Elkhart County government, and the developers who negotiated the original fee. We have been working since January to find an equitable solution.
First, some history. Many years ago, developers urged the city to extend utilities to help with development without waiting for annexation. The city did not want to chase development outside the city, where the taxes are lower. So the developers agreed that a fee would be charged to keep the cost of doing business relatively equal, regardless of which side of the city limits the business located.
This method of extending utilities without annexation is primarily an Elkhart phenomenon. In other cities, the city limits follow development, so PILOT fees are not common. This worked pretty well for many years, encouraging millions of dollars of business investment and thousands of jobs. In 2013, the deal looked less favorable and some businesses rebelled.
The Chamber has recommended the city proceed with annexation of the business properties to match the other cities in the region. Annexation comes with complications, involving county TIF districts, but that is a column for another day. Regardless, the city is now making plans for annexation, and for that it should be commended.
The problem comes with how to handle the PILOT fee in the meantime. I had the opportunity to serve on the mayor’s task force to look at solutions. The meetings were not open to the public, but I’m happy to share some of the discussion. We looked at basing the charge on a flat fee, but that didn’t seem fair to small companies. So we discussed a graduated flat fee, but that would do basically the same as basing the fee on assessed value, but be more complicated.
We looked at basing the fee on usage. But state law says the city loses control of usage fees. Once the city loses control of PILOT revenue, it loses control of Greater Elkhart Fund money used to pay for programs like economic development and residential trash hauling. If the council intends to cover those items by cutting elsewhere, the Chamber, our businesses and local residents need to know what specific cuts are coming. Which programs that serve in-city businesses and residences will be cut?
The task force recognized, as did the mayor, the 75 percent PILOT fee was outrageous. We looked at the mayor’s proposal of 50 percent, then decided to suggest 35 percent.
The task force recommendation is not exactly what the Chamber wanted, but it is a good compromise that is close to revenue-neutral and continues to provide services to businesses inside and outside the city. Compromise is one of those things governments used to do in the good old days.
The task force completed its work at the end of May. The Chamber has been studying this since January. The Council has been listening to testimony since early in the year. It is now July. The community has been waiting for resolution.
In our Chamber communications, I have been telling our members the council has no excuse for failing to resolve this issue by its next meeting. Due to the actions of the council committee of the whole last Wednesday, it will not be solved Monday night. There is no excuse for further delay.