Charges for Services – Eliminate Free Sewer Service for Seniors

Revenue: $17 million

 

The City provides free sewer service to seniors “residing in their own residence with separate metered water service or a separate city water assessment for that residential unit.”[1]  To seniors who do not qualify for free service because they do not have separate metered water service, the City provides a $50 rebate to qualifying seniors to offset the costs of their sewer service.  Seniors (defined as 65 or older) who own their own homes and live in condominiums, cooperative apartments, or townhouses where there is a shared water bill, qualify for the rebate.[2]  Seniors must apply to their aldermen to receive the benefit.

Under this option, the free sewer service and the rebate program would be eliminated.  According to the 2010 census, there are 115,361 senior households that are owner-occupied in the City.  This is out of nearly 1.05 million total households in the City.[3]  At least 8,000 of the senior households do not qualify for free sewer service because they participate in the rebate program.  Assuming that the remaining approximately 107,000 senior owner-occupied households qualify for free sewer service and that the average sewer charge per household was $155 in 2010,[4] eliminating free sewer service for seniors would generate $16.6 million in additional revenue annually.  Eliminating the rebate program would save the City an additional $400,000 annually.[5]  Thus, the total additional revenue from this option is an estimated $17 million.

Proponents might argue that it is unfair to provide seniors with this benefit and not other homeowners. Of all age groups nationally and in Illinois, seniors are the least likely to live in poverty.[6]  Thus, a proponent might argue that they are least in need of this assistance.  Second, this program is unfair to seniors who rent.  Renting seniors may pay for some sewer costs as landlords may pass those costs on in the form of higher rents.  However, they do not benefit from the program. Opponents might argue that seniors often live on fixed-incomes and cannot afford to pay sewer charges, or, in the case of rebate program participants, lose a $50 rebate.

 

 Discussion and Additional Questions

Some might argue to restructure the program so that the benefit is provided based on income level as this would better target the subsidy to seniors most in need.  However, this would add substantial administrative costs to the program.  To avoid these costs, the City could tie the eligibility to the subsidy to other income-based programs such as food stamps or the low income home energy assistance program.  Another restructuring would be to raise the age of eligibility above 65.  For instance, if the age were raised to 75, only 55,584 households would be eligible, less than half the current number.  Some questions to consider in deciding whether to implement this option include:

  • What is the precise value of the exemption?  How many homes are currently exempt through this provision?
  • What would the average sewer charge be for these exempt homes?
  • How much does it cost the City Council to administer the rebate program?

Budget Details

Fund: Sewer Fund, 0314 Type of Revenue: Sewer Rates
The appropriation is located on page 20 of the 2011 Annual Appropriation Ordinance.

http://www.cityofchicago.org/content/dam/city/depts/obm/supp_info/2011BudgetOrdinance.pdf

 

 


[1] City of Chicago. Municipal Code. Section 3-12-050 (American Legal 2011)

[2] City of Chicago. Committee on Finance. “Sewer Charge Annual Refund for Seniors.” http://www.committeeonfinance.org/claims/sewer.asp

[3] U.S. Census Bureau. 2010 Census. Geography: Chicago (city). Population: Tenure, Household Size, and Age of Householder

http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml

[4] $144.145 million in residential sewer sales divided by (930,199) the number of estimated non-senior owned households=$154.96

2010 Comprehensive Annual Financial Report for Sewer Fund. pg. 38.

http://www.cityofchicago.org/content/dam/city/depts/fin/supp_info/CAFR/2010/Sewer2010.pdf

[5] City of Chicago. “2011 Annual Appropriation Ordinance.” pg. 348.

http://www.cityofchicago.org/content/dam/city/depts/obm/supp_info/2011BudgetOrdinance.pdf

[6] Kaiser Family Foundation. “Poverty Rate by Age.” Statistics are as of 2008.

http://www.statehealthfacts.org/comparebar.jsp?ind=10&cat=1