ARLINGTON COUNTY, VIRGINIA. County Board Agenda Item Meeting of May 20, 2017

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1 ARLINGTON COUNTY, VIRGINIA County Board Agenda Item Meeting of May 20, 2017 DATE: May 15, 2017 SUBJECT: An Ordinance to Amend, Reenact, And Recodify Chapter 63 (Utility Tax) Of Arlington County Code Relating to the Residential Utility Tax On Electricity and Gas Rates, Effective July 1, C. M. RECOMMENDATION: Adopt the attached amendments to Chapter 63, of the Code of Arlington County, Virginia, to increase the residential utility tax rates, effective July 1, ISSUES: There are no known issues. SUMMARY: In the FY 2018 budget adoption process, an increase in the residential utility tax was proposed to increase the dedicated source of funds for implementation of the Community Energy Plan (CEP) through various programs supported by the Arlington Initiative to Rethink Energy (AIRE). The recommended increase in tax rates continues to exclude a certain level of utility consumption from taxation and sets a cap on the maximum tax that will be paid per month for electricity and natural gas. The tax rates proposed here remain the lowest among neighboring jurisdictions in Northern Virginia. It is recommended that the previous electricity tax rate of $ per kwh be increased to $ per kwh, with the first 400 kwh (per month) excluded from taxation. It is recommended that the previous natural gas tax rate of $0.030 per CCF be increased to $0.045 per CCF, with the first 20 CCF (per month) excluded from taxation. This proposal would generate approximately $652,000 in additional funding. BACKGROUND: Arlington has had a utility tax on residential customers of electricity and natural gas since FY The State allows localities to impose a utility tax on residential consumers of electricity and natural gas that cannot exceed $3.00 per month for each utility ( ). Two jurisdictions in the region have a residential utility rate higher than the State maximum of $3.00 per month because their previously adopted higher rates were grandfathered when the State capped the monthly tax for residential utility customers in County Manager: ##### County Attorney: ***** Staff: John Morrill, DES 38.

2 Arlington remains the only jurisdiction in Northern Virginia that excludes the first 400 kwh of electricity usage and the first 20 CCF of natural gas usage from taxation. Arlington also remains the only jurisdiction in Northern Virginia that does not impose a monthly minimum tax on consumers. This methodology is designed to impose a greater tax on heavy users of natural resources while imposing little or no tax on residents that use less than average amounts of electricity and natural gas. Comparison of Residential Utility Tax Rates, Minimums in Northern Virginia, FY 2018 Electricity Natural Gas Jurisdiction Rate/kWh Min. Max (*) Rate/therm Min. Max (*) max ARLINGTON $ $0 $ $ $ 0 $ Alexandria $ $ 1.12 $ $ $ 1.28 $ Fairfax County $ $ 0.56 $ $ $ 0.56 $ Fairfax City $ $ 1.05 $ $ $ 1.05 $ Loudoun County $ $ 0.63 $ $ $ 0.63 $ Falls Church $ $ 0.70 $ $ $ 0.70 $ ,103 (*) Fairfax County and the City of Falls Church have higher monthly maximum caps because their taxes were established prior to General Assembly legislation on the topic; their caps were grandfathered. The estimated $652,000 increase in revenue from this recommended change in residential utility tax rates was included in the FY 2018 adopted budget and was allocated to personnel costs related to shifting a Principal Planner (1.0 FTE) from the General Fund to the AIRE program ($150,000); consultant expenses associated with energy analysis and modeling for a review of the CEP in 2018 ($100,000); and with the remaining $402,000 used for increased investments in energy efficiency in County and APS facilities. In FY 2018, APS will receive $303,832 under the Principles of Revenue Sharing agreement from the increase in this local tax. DISCUSSION: Over the ten years the AIRE program has been in place, significant progress has been made in the overall energy performance of the community. A sampling of major accomplishments includes the following: The original core AIRE goal was achieved a ten percent reduction in greenhouse gas emissions from County operations was met in 2012, and emissions reductions have continued to grow. Annual purchases of green power have risen from 3 percent of County electricity use in 2007 to over 30 percent of County electricity use in Energy use per square foot of County buildings has been reduced by 13 percent since Annual electricity and natural gas use throughout the Arlington community has been essentially flat since calendar 2007, despite significant economic growth and a 10 percent increase in resident population. The CEP was adopted by the County Board as an element of the Comprehensive Plan in June

3 Thousands of residents have been engaged in AIRE programming, including efficiency rebates, successful solar co-ops, light bulb exchanges to encourage residents to switch to highly energy efficient LED lighting, the Green Home Choice program, and innovative educational programs like the Energy Journey and the first-of-its-kind Energy Lending Library. Scores of businesses have participated in AIRE programming, including the AIRE Champions awards of , the Green Games in , commercial lighting rebates, and the long-standing Green Building Incentive Program. A new Property Assessed Clean Energy (PACE) financing program, the first of its kind in Virginia, is planned to open for business for commercial properties in Arlington in FISCAL IMPACT: The estimated revenue increase of $652,000 (of which $303,832 is designated for Arlington Public Schools), is included in the FY 2018 Adopted budget, subject to County Board approval of this rate increase. This proposed rate increase would become effective on or about July 1, 2017, to allow time for the electric and natural gas utility companies to adjust their billing systems to reflect the revised rate structure

4 Attachment I AN ORDINANCE TO AMEND, REENACT, AND RECODIFY CHAPTER 63 (UTILITY TAX) OF ARLINGTON COUNTY CODE RELATING TO THE RESIDENTIAL UTILITY TAX ON ELECTRICITY AND GAS RATES, EFFECTIVE JULY 1, BE IT ORDAINED that Chapter 63 of the Arlington County Code is amended, reenacted, and recodified as follows, effective July 1, Chapter 63 UTILITY TAX Levy; tax rate; rate payment. *** There is hereby imposed and levied by Arlington County upon each and every consumer of a utility service a tax in the following amounts with respect to each utility service, which tax in every case shall be collected by the service provider from the consumer and shall be paid to the service provider for the use of Arlington County at the time the purchase price or such charge shall become due and payable under the agreement between the consumer and the service provider. There shall be no tax computed on bills submitted on sales of electric utility service for resale. (a) Electric utility consumer tax. In accordance with Virginia Code , there is hereby levied a monthly tax on each purchase of electricity delivered to consumers by a service provider, classified as determined by such provider, as follows: 1. Commercial consumers --Such tax shall be one dollar and fifteen cents ($1.15) plus the rate of $ on each kwh delivered monthly to commercial consumers. 2. Industrial consumers --Such tax shall be one dollar and fifteen cents ($1.15) plus the rate of $ on each kwh delivered monthly to industrial consumers. 3. Residential consumers For electricity consumption in excess of 400 kwh such tax shall be $ $ on each kwh delivered monthly to residential consumers not to exceed $3.00 per month; provided, however, in the case of any multi-family dwelling served by a master meter or meters, such tax shall be $ $ on each kwh delivered monthly in excess of the number of units times 400 kwh with the tax not to exceed $3.00 multiplied by the number of individual dwelling units served by the master meter or meters. (b) Local natural gas utility consumer tax. In accordance with Virginia Code , there is hereby levied a monthly tax on each purchase of natural gas delivered to consumers by pipeline distribution companies and gas utilities classified by "class of consumers" as such term is defined in Virginia Code J., as follows: - 4 -

5 1. Commercial and industrial consumers --Such tax shall be $0.845 plus the rate of $ on each CCF delivered monthly to commercial and industrial consumers. 2. Interruptible nonresidential consumers --Such tax shall be four dollars and fifty cents ($4.50) plus the rate of $ on each CCF delivered monthly to nonresidential consumers of interruptible gas service. 3. Residential consumers For natural gas consumption in excess of 20 CCF such tax shall be $.03 $.045 on each CCF delivered monthly to residential consumers not to exceed $3.00 per month; provided, however, in the case of any multi-family dwelling served by a master meter or meters, such tax shall be $.03 $.045 on each CCF delivered monthly in excess of the number of units times 20 CCF with the tax not to exceed $3.00 multiplied by the number of individual dwelling units served by the master meter or meters. *** - 5 -