WESTFIELD – The Municipal Light Board voted 6-1 to approve a payment in lieu of taxes (PILOT) of $415,000 for the 2015 fiscal year, which begins July 1, as city officials initiate the process to adopt a new municipal budget.
The MLB voted last October to set a PILOT cap of $500,000 to limit the annual payment to the city which would have increased substantially again this year. The payment for the current 2014 fiscal year, approved in April of 2013, was $405,919.
Management had prepared a recommendation of making a PILOT payment of $440,000 based on the cap of $500,000 and a $60,000 deduction for maintaining the city’s traffic lights and controllers.
Several MLB members argued that there should also be a deduction of $25,000 to recoup the final reimbursement of a $100,000 “loan” to the city to upgrade the traffic light controllers during the Great River Bridge project.
The PILOT for the 2016 fiscal year, which the MLB will vote on next April, will reflect the higher amount of $440,000.
The formula used to calculate the PILOT incorporates 70 percent of the department’s plant value times the commercial tax rate. The 2015 fiscal year plant value declined by $534,872 compared to last year, but the city’s commercial tax rate this year increased by 2.75 percent. The commercial tax rate for FY 2014 year was $31.09 per $1,000 of value and jumped to $33.84 per $1,000 of value for the FY 2015 year.
The formula would have resulted in a PILOT of $523,748 had the MLB not voted to cap it at $500,000, then further reduce it last night by the $60,000 for the traffic light system and the $25,000 deduction for the final year of the loan recovery.
Several board members asked for verification of the $100,000 loan and if the total amount had been spent, arguing that if those funds were not totally encumbered, the board should not deduct the final $25,000 reimbursement. The board requested management to prepared a report on the $100,000 expenditure and may revisit that issue at its May meeting.
“We can’t take the credit if it hasn’t been expended,” Ward 6 Commissioner Robert Sacco said.
The formula, then at 80 percent of the department’s commercial tax value was adopted in 2004 to increase the pilot payment from around $200,000 to $300,000 annually. However, investment in the utility’s plant pushed that number higher and the Board voted last June to lower the percentage used on the formula calculation from 80 to 70 percent, then imposed the $500,000 cap at its October 2013 meeting.
The PILOT translates into an additional charge of more than $10 per gas customer and $20 to an electric customer. Customers with both utilities pay about $32 to subsidize the annual payment.
One major factor leading to the $500,000 PILOT cap was that historically the city paid the other post employment benefits (OPEB) for all city employees. Mayor Daniel M. Knapik has moved the OPEB, which are substantial liabilities, from the city budget into the revenue generating departments, such as the Westfield Gas & Electric, Water Resource and Wastewater treatment departments.
The MLB is funding the department’s OPED at $500,000 a year, a substantial cost avoidance which allows the city to dedicate that funding, which in the past it would have had to commit to OPEB for the department’s staff, to other priorities.
