EXPLANATION OF THE STATUS OF PUBLIC FIRE PROTECTION FEES AND THE VILLAGE
A public fire protection (PFP) charge in Wisconsin is a charge to cover the costs of infrastructure – such as hydrants, larger water mains, and increased pumping capacity – needed to supply enough water pressure for firefighting. The amount of a PFP charge is established by the Public Service Commission (PSC).
Under Wisconsin law there are two ways a water utility may collect a PFP charge. The first is through a direct charge on water customers’ bills. The second is by collecting the PFP charge from the municipality.
Baldwin Water Utility’s rates and rules are established by the PSC and reflected in tariffs on file with the PSC. The Water Utility’s current tariffs provide for an annual PFP charge of $224,579 to the Village.
In the spring of 2016, Village Administration added a “Public Fire Hydrant Charge” to the residents’ water/sewer billing. Like today, the Water Utility’s tariff at that time provided for a PFP charge to the Village not a direct charge to customers. The Village continued to include this hydrant charge on its water/sewer billings up until a few months ago.
Over the years, the amount collected through the hydrant charge on residents’ bills was not enough to meet the full PFP amount established by the PSC and owed to the Water Utility. The Village paid for the rest of the PFP amount it owed to the Water Utility from the Village’s General Fund, or the tax levy base.
While getting ready to file a request for a water rate increase with the PSC, the Village identified its method of collecting for the PFP charge as a potential issue. At that time, the Village and its accounting firm contacted the Consumer Affairs division of the PSC to discuss the issue. The Village subsequently stopped including the hydrant charge on residents’ water/sewer bills but will be asking the PSC to modify the Water Utility’s tariffs to reflect that the PFP charge will be placed on customer bills going forward.
The PSC’s Consumer Affairs division has made a statement stating the Village owes residents 10 years of back payment for the hydrant charge because the charge was not authorized by the Water Utility’s tariffs. The Village disagrees and believes a municipality has separate authority under Wisconsin law to collect the funds to pay the PFP charge it owes by placing special charges on property owners’ bills and that any complaint about these charges should have been raised with the Tax Appeals Commission long ago.
Refunding these charges to past customers now would require water rates to be increased even more than our current request to the PSC. Should payback be necessary, a very large loan over 2 million would need to be taken out by the Water Utility, and water rates would
reflect the increase needed to pay the Water Utility loan off. Current and future customers would be bearing the cost of paying back past customers who benefitted from the PFP service that was previously provided by the Water Utility and the Village.
At this time, the Village is working through the case study with the PSC.