Publisher's note: The author of this post is Dan E. Way, who is an associate editor for the Carolina Journal, John Hood Publisher.
Residents say they'll be charged rent for bins they purchased from city
DURHAM — Some Durham residents have raised alarms over what they view as a hidden, illegal tax imposed by city government in the yard waste removal program.
But city officials say the extra $1.50 monthly fee ends government subsidies for some at the expense of others, and should make the voluntary yard waste removal program self-sustaining. Residents of Durham's neighborhood association email lists (aka listservs) began complaining that the fee was unfair and questioned how they could be charged rent on an item they own. Roy Cordato, vice president for research and resident scholar at the John Locke Foundation, said it "was just a property tax."
"I think we did a bad job communicating the change, and the economics behind the change, and we are working on some clarifying information,"
said Bo Ferguson, Durham deputy city manager.
At the heart of the unrest was a letter sent by Donald Long, director of the city's Department of Solid Waste Management, announcing pending changes to customers.
"Effective July 1, all carts now have a monthly rental fee regardless of past purchase history,"
the letter read. Residents in the program who bought a cart are going to be charged an extra $1.50. That would raise their monthly service fee to $7.50, the same rate paid by those who rent their carts.
Ferguson said the city was attempting to correct imbalances in the assessment system and billing process inefficiencies and errors, and the new fee was a part of that process.
"All of our expenses are borne equally by everyone in the program, and it was now artificially apportioning costs to people who are not in the ownership category, and it's subsidizing the costs of the people who were in the own-their-cart category,"
That is because the city chose to repair or replace all yard waste bins whether they were rented or purchased.
The purchase option ended after 2008, and since then all carts are issued by the city on a rental basis. But the city charged a lower fee for owners than renters, and grandfathered that differential into the billing process.
"That fee was not updated over time to reflect true costs,"
Ferguson said. "The majority of the program's costs going forward, and really for the last several years, have been tied up in cart maintenance and replacement, and that's a service that all customers get."
City officials decided that trying to give a long-winded explanation on a simple notification letter would be too complex, and likely not read.
"In an effort to have a straightforward communication we essentially said everybody's paying the same rate, and the folks who pulled that information together called it mandatory cart rental,"
Ferguson said. "I regret that terminology."
State Department of Revenue spokesman Trevor Johnson said the rental fee "would not qualify as a property tax, which falls under DOR's area of expertise."
Christopher McLaughlin, associate professor at the UNC School of Government and a Durham resident who has been following the controversy on neighborhood listservs, said the dust-up is "more of a labeling issue or a categorization issue" than a tax matter.
"I don't think anybody's called it a tax,"
McLaughlin said. "The only people who called it a tax are these listserv folks. The city's not calling it a tax."
He said the idea "this is either a hidden or illegal tax is not an accurate one. It is fair, I think, to say, 'Hey city, what are you doing charging me a fee on something I own, if in fact we own them?'
"But even if you prevail on that argument, the city's simply going to say, 'OK, no problem. Now we're going to call it something else, or roll it into the other monthly fee.' So I don't see it going away,"
Local governments can't levy taxes unless they have authority to do so via statute.
"So we can't make up our own yard waste bin tax in Durham,"
McLaughlin said. Nor would a yard waste bin be subject to a property tax unless it was used for commercial purposes creating income. Yard waste bins "would be exempt from taxation just like your TVs, and your bicycles, and your sofas."
And, he said, "Property taxes are all ad valorem [based on the valuation of the property], they're not flat-fee taxes."
While Ferguson said city officials "don't have adequate records" to determine the split between owners and renters on cart maintenance and replacement costs, McLaughlin said he believes he owns his yard waste bin, and it was replaced free of charge when it was damaged.
Aside from equalizing maintenance costs and ensuring the program is self-sustaining through user fees, the city wanted to fix a faulty processing system, Ferguson said.
Billing included multiple options, and multiple tiers on monthly and annual levels, "and the complexity of those systems were creating a lot of billing errors,"
Ferguson said. "So we had duplicate bills go out that we had to clean up, and it was because these two systems didn't talk well to each other we had to maintain two different databases."
So the reforms are expected to result in eliminating an "unacceptable level of errors," gained efficiency in staff time, and improved customer service, he said.
"I would also point out that anyone who did buy their carts prior to 2008, they have now more than recouped the original purchase price"
of $60 or $70, Ferguson said.
An owner who bought a cart seven years ago when the purchase option ended would have saved $126 by not paying the additional $1.50 that renters have been shelling out.
Ferguson said, "that money saved was really an expense that we continued to incur in the program."