ELKHART — Even under the traditional agreement, the city of Elkhart charges significantly more for sewer service to commercial customers outside of the city than several other municipalities in Indiana.
That disparity is significantly greater for many companies that fall under the existing compact policy, which led one business owner to call the situation “horrific.” And that was mild.
The Elkhart Truth checked with eight cities in Indiana and none charges anything close to Elkhart’s existing sewer service agreement, which charges customers 300 percent more than if they were in the city.
Those 75 companies are being forced to shift to a compact fee policy and join 63 other companies that have been paying compact fees for years.
The compact fee is based on assessed property value instead of usage.
Many business owners claim the change will result in increases ranging from 500 percent to 1,300 percent in some instances for properties with higher assessed property values.
The city council approved the ordinance mandating the shift late last year, but many council members express regret over that move and admit they were unaware of the impact.
While policies vary from city to city, none of the cities contacted by The Truth charges monthly fees based on assessed property values. Two require additional fees calculated on tax records.
Representatives of several cities, including Lafayette and Columbus, said they treat customers in and out of the city the same. Anderson charges the same rate, but requires a one-time tap fee for those outside of the city that is three times as much. Terre Haute charges the same and requires a tap fee based on expected use.
Goshen and South Bend charge the same rates for customers inside and outside city limits, but require an additional annual fee that translates into a payment in lieu of taxes.
In Goshen, the city charges a payment in lieu of taxes for sewer and water use for residential and commercial customers. However, all of those arrangements involve residential customers because commercial customers seeking the service are soon annexed into the city, according to Mayor Allan Kauffman.
The fee is 50 percent of what they would pay in city taxes, Kauffman said.
South Bend charges an annual fee to customers outside of the city. For just sewer, customers pay 30 percent of the difference between the city tax rate and the county tax rate. Companies that use sewer and water pay 50 percent of the difference between the two rates, according to Jack Dillon, director of the city’s long-term combined sewer overflow project.
Fort Wayne is in the midst of a 20-year CSO project that has a $500 million price tag. As a result, the city has instituted annual rate hikes of about 8 percent for more than five years, Dillon said.
Fort Wayne charges 25 percent more for outside customers, according to Mary Jane Slaton, program manager for Fort Wayne city utilities.
Mishawaka takes a unique approach. The city charges the same rate but provides customers inside the city with a credit paid with revenues from tax increment financing, said John Julien, a partner with Umbaugh, a Mishawaka-based consulting firm that works with many Indiana communities on government financing matters.
The average residential customer in Mishawaka receives a monthly bill of about $48.35, but receives an $11.55 credit — about a 24 percent discount. Commercial customers see a 25 to 30 percent discount as well, he said.
TIF revenues are captured as a result of new additional property taxes from new construction.
“It’s a way of growth paying for growth in the city,” Julien said. “The city’s had a pretty pro-active approach to growing its tax base.”
Business owners livid
Mayor Dick Moore and his administration say the switch to compact fees is an attempt to level the playing field and protect the city’s financial health.
Moore declined to provide comment when told of the comparison and expressed concern that it would be difficult to achieve an accurate assessment.
Opponents of the compact policy warn it could cripple their businesses, and some city council members believe the policy — if not altered — could lead to job losses and hurt the city’s ability to attract new industry.
The change in policy has left some business owners livid. Some are coordinating efforts and have contacted the Indiana Attorney General’s office, the Greater Elkhart Chamber of Commerce and local state legislators.
Steve Schemenauer, one of several owners with Sherwood Industries, assembled a similar list of how other cities provide service. He said he and other business owners have shared that list with the mayor and city council members.
He doubts the comparison will change Moore’s outlook.
Sherwood Industries includes three buildings off of C.R. 6 that employ about 35 people. Sewer bills for the three buildings total about $350 per month. Under the compact policy, Schemenauer believes the monthly bill will rise $2,000 to $2,400.
He said the business would struggle under those circumstances.
“It’s horrific. I don’t know who crafted this, but it’s horrible,” Schemenauer said. “There’s no doubt it’s a money grab.”
Marvin Ailstock, a retired businessman who leases a commercial lot on C.R 6, said the hike is nothing more than a tax. Given the size of the increase, he questions whether it is legal.
The policy could put a dent in his retirement plan.
After stepping down from a window treatment distribution business in 2007, Ailstock began leasing the property to generate retirement income. Under the compact, the tenant’s sewer bill is expected to rise from $81 to $500 per month. and Ailstock believes he’ll lose his tenant.
“I can’t imagine that any thinking individual, regardless of party affiliation, could think that something like this would not be detrimental to the economy,”
Much of the anger is directed at Moore.
“He’s trying to rape the constituency,” Ailstock said.
‘It’s a huge issue’
Councilman David Henke, a Republican who believes the policy could be a “job killer,” said the comparison with other cities provides a convincing case “that it has to be volume-based and not property tax-based.”
Council president Ron Troyer, a Democrat, said he contacted some cities and has concluded that policies vary widely.
While he said he “remains open” on ways to solve the controversy, Troyer said he’s increasingly bothered by the assessed value formula.
“It’s a huge issue,” Troyer said. “It’s big money.”
Facing a firestorm of criticism, Moore was able to convince council last week to adopt what he considers a compromise that will allow companies switching to the compact policy to see their charges phased in over two years.
But many view that change as a stop-gap measure until the policy is revised.
In agreeing to the phase-in, Troyer vowed to consider amending the ordinance with or without the mayor’s help.
Within days, though, Moore announced his willingness to revisit the policy and said he would seek input from business owners and city council members.
Moore said he plans to begin looking at changes to the ordinance in the next few days.
Henke said he’s been told representatives of the companies feel their case against the compact policy is a “slam dunk.”