The BPU Dividend

One of the largest contributors to the city of Jamestown is the Board of Public Utilities (BPU). In 2012, the BPU through its electric, water, district heat, waste water and solid waste divisions, contributed over $3,500,000 to the city as a “payment in lieu of taxes.”

This year, the city has asked that in addition to this, in 2014, it would like another $475,000 from the BPU in the form of a “dividend.” In total the BPU would be supporting the city of Jamestown with about $4 million per year.

It is not uncommon, in the private sector, for subsidiaries to contribute toward the overhead of a parent corporation. However, $4 million is a lot of money, and some board members at the BPU have been reluctant to “up the ante,” so-to-speak. They have argued that the BPU has aging infrastructure which needs to be maintained with this money, and that Jamestown should not consider the BPU to be an annual “cash cow” to help balance the city’s budget.

The BPU also has a broader constituency than just the city of Jamestown. It provides electric, water and sewer service to customers in Falconer, Lakewood, Ellicott and Busti. So, some of these “dividend” monies would be coming from outside the city itself. It is a way for the city to broaden its tax base.

The issue is complicated by the fact that ratepayers of the BPU are also taxpayers. Though the fees that are charged by the BPU are not called “taxes,” they have the same effect on the citizenry as a directly imposed real property tax. The average “Joe” on a tight budget has the same obligation to pay his BPU bill as he does his real property tax bill.

The advantage to the City Council in Jamestown is that they do not have to add this $4 million charge to their real property tax levy. It is always easier, to have someone else collect a tax. Yet, to the man on the street, the cost is the same.

The taxpayer is also the ratepayer.

As a practical reality, in 2014, the tax levy of the city is only $64,000 under its New York state tax cap … so it would have a hard time raising $4 million even if it did try to raise these funds through the real property tax levy.

It all sounds complicated, but the “guts” of the debate going on is whether or not and to what extent the BPU should be a revenue-raising agent for the city. It is a discussion worth having.

A Chautauqua County resident interested in analyzing public policy from a long-term perspective writes these views under the name Hall Elliot.