Municipalities Ignore Lead Issue While Scamming $100 Million from Ratepayers

By Lucas Vebber

Everyone agrees that abating lead pipe water lines is an important health issue. But what is the most equitable way to pay the enormous cost to do so?

Legislation being pushed in Madison (Assembly Bill 78/Senate Bill 48) would allow water utilities to raise water rates to give homeowners money to replace their pipes. But most people are surprised to learn that they are already paying what amounts to, on average, a 15 percent tax on their water bill. Where is that money going? What is it being spent on?

The answer is as troubling as it is surprising. The 15 percent that ratepayers are already paying as a backdoor tax on their water bill goes to the municipality where they live. What do local governments spend this windfall of money on? Whatever they want – there is no restriction on how municipalities spend the roughly $100 million statewide taken from water users each year – money that is also taken from homeowners with lead pipes.

It’s troubling that municipalities have been receiving hundreds of millions of dollars of “payment in lieu of taxes” from water utility rate payers for decades, but have done very little, if anything, to use this money to help abate the lead pipes of the homeowners from whom they have been taking it. This tax was originally implemented to help level the playing field between private water utilities that had to pay taxes and municipally-owned utilities that did not. Unfortunately, what was originally designed to ensure competition has become little more than a $100 million cash cow for local governments.

Not content with the enormous slush fund of money they are already taking from water users, municipalities now want even more money from businesses and homeowners in the form of higher water rates. They want to grab even more money from water rates to pay for replacing homeowners’ lead pipes, but have not explained why they refuse to use the $100 million per year they are already taking from ratepayers to do so.

There is no question that prolonged lead exposure is detrimental to human health. Abating lead pipes should be a priority for property owners and the municipally-owned water utilities that they get their water from. Municipalities have known about the problems lead pipes cause for many years, while happily taking millions of dollars each year from rate payers and spending it on other purposes. Now, because of their own financial mismanagement and irresponsible budgeting, local governments are coming back to the Legislature to say they need more rate payer money.

Enough is enough. The public needs to know about the “payment in lieu of taxes” scam that municipalities have been using as a backdoor means to impose a 15 percent tax on water bills. Rate payers do not need to pay more money to abate lead pipes for private property owners. Municipalities can and should instead be required to use the $100 million windfall they are already taking from rate payers to help alleviate the financial burden of abating lead service lines in our state.

We should not be rewarding municipalities for their years of fiscal mismanagement while they have done very little to address this public health issue.

Vebber is General Counsel and Director of Environmental and Energy Policy for Wisconsin Manufacturers and Commerce (WMC).

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If you would like to publish this column, please contact Nick Novak at nnovak@wmc.org or 608.258.3400.