St. Albans City and Town leaders weighed in on a bill before the Senate Government Operations Committee last week that would temper the city’s ability to charge a long-disputed fee to its water and sewer service customers who are located in the town.
S.176 is sponsored by Sen. Jeanette White, D-Putney, and prohibits municipalities from establishing water or sewer rates based on the appraised or assessed value of property in another community — unless the voters there approve the rate’s basis in an election.
Currently, St. Albans City uses the surrounding town’s appraisal values to calculate an “affiliation fee,” which it charges to about two dozen homes and businesses that use city water and/or sewer service but are located in the town.
For instance, the fee for new construction or expansion of existing property requiring water and sewer connections is 32 cents per $100 of value.
The affiliation fee was enacted in 2015 and is levied on top of the city’s regular water and sewer rates. Town users who had city water and/or sewer before 2015 — and therefore do not pay the fee — are charged a regular rate that is about 12% higher than it is for city residents.
Vermont law does not prevent municipalities from charging different rates to different groups of users, according to Tucker Anderson, a legislative counsel who was at the hearing Feb. 15. But one consequence of this, he said, is that ratepayers may end up in a situation like that in St. Albans: where one group cannot vote on a certain charge.
“This would change that dynamic,” Anderson said of the bill.
As it’s written, the bill also supersedes any conflicting municipal ordinance or existing water or sewer rate created before July 1, 2022, when it would go into effect.
The affiliation fee has been a source of contention between city and town officials since it was enacted, and disputes over water and sewer service go back even further. The two municipalities have gone to court multiple times over the issue.
Town officials argue the fee is an extraterritorial property tax, and the city’s criteria for determining whether or not to grant new water or sewer allocations infringes on their authority to plan new development. The city maintains the fee is necessary to protect its economic interests and that officials aren’t levying a tax because the city operates as a corporation beyond its borders.
Sen. Corey Parent, R-Franklin, who also is St. Albans Town’s director of operations, spoke at the hearing and said the bill stemmed from a conversation he had with White about the affiliation fee last summer.
Parent said that amid momentum in communities across the state to leverage American Rescue Plan Act funding for infrastructure projects, including water and sewer systems, he thinks it is important for the Legislature to weigh in on the affiliation fee model.
“It’s a matter of time before this will happen in other municipalities if we allow it to stand,” he said. “We want to look at (the fee) closely and understand how this works.”
St. Albans City’s affiliation fee model is unique, though it is not the only municipality in Vermont to sell water and/or sewer service to another community.
Ben Montross, drinking water program manager for the Department of Environmental Conservation, provided the Senate Government Operations Committee members with a memo detailing other places where this is the case: For instance, Rutland City provides water to parts of Rutland Town, he said, and Montpelier provides water to parts of Berlin.
At the hearing Feb. 15, Brendan Deso, who chairs the St. Albans Town Selectboard and is one of the homeowners who pays the affiliation fee, said he does not want to access St. Albans City’s infrastructure for free. Rather, he said, he and other town residents want legislators to determine whether the city should be able to charge the fee at all.
Deso said he was not speaking in his official capacity. Ed and Sally Groff, a St. Albans Town couple who also pay the fee, spoke at the hearing as well.
“We need to answer a straightforward question,” Deso said. “Shall the state of Vermont allow one municipal entity to tax property in a separate and distinct municipality without voter approval and selectboard consent? Or, quite frankly, at all?”
One issue in the affiliation fee debate is that the money the city brings in from the fee — currently, about $100,000 — goes into the city’s general fund, which pays for services such as police and fire. Town officials argue since their residents have no say over how this fund is used, the affiliation fee is a form of taxation without representation.
White, who chairs the government operations committee, asked St. Albans City Manager Dominic Cloud at the hearing why the city does this — rather than put the money it makes from the fee toward costs directly related to the water and sewer system.
Cloud said the city wants to make sure it benefits from any new development spurred by access to its water and sewer infrastructure, regardless of where it’s located. Without the affiliation fee, he said, the city feels the town would be “getting off too cheap.”
The city manager has suggested before that the town address residents’ complaints about the fee by paying the fee itself. On Tuesday, he said he thinks a better solution than what’s in S.176 would come from town officials working with the city directly.
“The selectboard — on their own motion at their next meeting — could send a letter with three votes,” Cloud said, “saying: ‘We find the affiliation fee repugnant, and we’d rather live without your water and sewer than accept it on the terms on which you’re offering.’”
“I think it would hold a lot of weight with the City Council,” he added.
The Senate Government Operations Committee is set to hear more testimony on S.176 this week.
