By Shereen Siewert and Damakant Jayshi
City leaders this week rejected an effort to eliminate a so-called “hidden tax” on residents, a change that advocates say could have reduced Wausau’s skyrocketing water bills.
During Tuesday’s budget discussion, the council approved continuing its practice of collecting roughly $1.6 million each year from Wausau Water Works as a property tax equivalent, or Payment in Lieu of Taxes. In theory, the PILOT compensates Wausau for property tax revenue the city would have collected from the utility if it were owned by a private company. Wausau then funnels that revenue for things that have nothing to do with your water – like parks, sidewalks, city salaries or other outlays. The payments are a reliable source of revenue, accounting for more than 15 percent of total water rate revenue collected statewide, according to the Public Service Commission.
But critics, including Dist. 3 Alder Tom Kilian, say these types of hidden taxes are contributing to the high cost of life-sustaining services, especially problematic at a time when many low-income residents face serious affordability challenges.
Manuel Teodoro, a UW-Madison associate professor who published a book on the connection between drinking water failures and public distrust, says the system used by cities like Wausau is a broken one. In his peer-reviewed paper, Teodoro said the ability of low-income families to pay for basic water and sewer services is a subject of increasing concern. He also wrote about this issue in a Milwaukee Journal Sentinel opinion piece.
“When people pay taxes through their water bills, the government response to nonpayment is denial of a life-sustaining service,” Teodoro said. “Nobody should have their water shut off because the city wants money for a jail or to pay a city employee’s pension.”
Wausau’s residents have seen their water and sewer rates increase sharply over the past several years as the city grapples with funding its new treatment facilities and PFAS-removal costs. Kilian, who wrote an opinion article arguing the tax be removed, suggested phasing out the annual withdrawal to significantly reduce residents’ water rates.
In an email to Kilian, Wausau Finance Director Maryanne Groat confirmed the approach would ultimately result in a 20 percent decrease in the water rate. But that information did not resonate with a majority of the council.
“You had requested information related to the rate increase and the possible decrease in rates if the water tax equivalent was abolished, Groat wrote to Kilian on Nov. 7. “The rates you used in the PILOT article were accurate.”
Lisa Rasmussen, who represents Dist. 7, objected to the proposal, which Kilian has been raising for at least four months, and called it a last-minute “chaos-causing” request. She said if the PILOT payments were rejected, the city could not continue providing services expected by residents.
Rasmussen said people should not be led to believe that the tax equivalent from the utility is unnecessary.
Alder Doug Diny agreed with Kilian and said that collecting the tax openly would be more transparent for residents.
But Groat said if the PILOT payments were not approved, Wausau would have no option other than going to the Public Service Commission for a $2 million rate increase.
Kilian’s amendment to reduce the amount to zero was defeated, 3-8, with Kilian, Diny and Lou Larson in the minority. Diny’s alternate proposal, to reduce the withdrawal by $100,000 every year over 15 years, was also defeated with the same set of alders voting identically.
But the debate could continue in the future. On Tuesday, Alder Gary Gisselman suggested the Finance Committee and the Wausau Water Works Commission submit a report on the merits of the system by next August. His motion passed unanimously.
