Rising utility bills are one of many factors exacerbating Austin’s well-documented affordability crisis. When Austin utility bills went up last winter, many residents probably didn’t even notice — mostly because the increase in fees was hidden by reductions in other costs.
But here’s the truth: The city of Austin is squeezing its customers more than they know. The Texas Public Policy Foundation recently filed a lawsuit, on behalf of local taxpayers, against the city for imposing an unconstitutional tax on utility customers.
Most people pay their utility bill without much scrutiny — as long as the amount isn’t significantly higher or lower than the previous month. Last winter, the increase totaled $9.54 per month for the typical customer.
However, Fox 7 Austin reported that with the decline in the cost of buying and selling energy in the ERCOT market, a portion of the energy bill “will be an average of $5 less than the rate last year.”
In other words, even as electricity costs came down, the city levied higher fees, which consumers have no choice but to pay.
One of the hikes on Austin utility bills is in the Transportation User Fee, or TUF. This year that fee is increasing by 11% on average, adding about $2.06 a month to the typical single-family home’s bill.
The TUF has been around since the 1990s, when the city of Austin passed an ordinance to add the fee to utility bills to help pay for street maintenance and repair. The city claims this fee saves taxpayer money by supporting “preventative maintenance” rather than waiting for “full street reconstruction.”
But what does infrastructure repair have to do with keeping your lights on and water running? There doesn’t seem to be a connection. But if someone does not pay this fee, the city of Austin can either shut off the utilities or bring legal action against that person.
Cities in Texas can establish fees for regulatory purposes, but these fees must, in fact, be connected to regulation. What a city cannot do is disguise a tax as a “fee” to bypass the legal limitations and requirements of implementing new taxes.
When a fee is established by the local government instead of a regulatory agency, is imposed on the general public instead of those under a regulation, and its purpose is for general revenue raising instead of covering regulatory costs, it isn’t a fee at all. It is a tax.
New taxes are not as easy to impose as regulatory fees. Taxes must be limited in amount, applied equally and uniformly, and cannot be changed at will by the city government. Importantly, a new tax cannot be implemented without first being approved by the city’s residents in an election.
Austin’s TUF appears to be a tax masquerading as a fee. First, the TUF was imposed by the city, not a regulatory agency, and there is no connection to any regulated activity.
Second, the fee is not limited to a specific industry affected by regulation; rather, it applies to everyone who receives a utility bill unless they are at least 65 years of age or do not own or regularly use a motor vehicle.
Third, the purpose of the TUF is to raise revenue to maintain the city’s infrastructure. The city did not hold an election for its residents to approve or disapprove of the TUF. Instead, the city brought it into being with the passage of an ordinance at a City Council meeting. When a local government wants to raise more revenue, it needs to ask, instead of forcing its residents to foot the bill.
So, take a look at your own utility bill. You will learn a lot more about what the city is charging you — but not why.