Average Residential Household Cost Comparison

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July 2015

 

Each year the Municipal Budget Office performs an analysis of the estimated annual amounts paid by the average residential Tempe household for direct services provided by the City of Tempe as well as the estimated total annual amount paid in City of Tempe property and transaction privilege (sales) taxes.  These amounts are then compared to the estimated annual amounts paid by the average residential household in seven comparison cities in the Phoenix metropolitan area.

For purposes of this comparison, we utilized the property tax, sales tax and utility service rates as of July 2015. The analysis assumed the same household consumption averages for all cities/towns for both water and wastewater services.  However, for property tax purposes, we utilized the median single family home value in each respective city/town in the analysis.  The sales tax amounts are based on the Phoenix metropolitan area median household income.  As such, this analysis is intended to reflect what the average residential household would pay for each of the services or pay in taxes in their respective city.
 

Overview

 

 

 

 Average $1,695

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1Overview
 
   

Solid Waste

 
  3SolidWaste   
The annual amount for single family residential solid waste services is estimated at $240 for the City of Tempe. The amounts noted above are based on a residential customer with a once per week collection, based on the rates as of July 2015.   
     

Water and Wastewater

 

WaterWastewater
The annual total amount for water and wastewater services for a single family residential customer in the City of Tempe is estimated at $610.  The annual water charge is based on a median single family residential monthly water consumption of 9,000 gallons, consistent with the most recent water rate study.  It is assumed that this water consumption amount is applicable to the other cities in the comparison.  As such, this consumption amount was applied to each respective city’s water rates as of July 2015 to derive the annual water costs. 

The wastewater charges noted above are based on the median residential monthly billing amount of 6,000 gallons. It is assumed that this monthly billing amount is applicable to the other cities in the comparison and is then applied to each respective city’s wastewater rates as of July 2015 to derive the annual wastewater costs. The billable gallons are derived from a median residential monthly water consumption of 8,570 gallons multiplied by a rate of return.  For example, Tempe’s rate of return is 70% or 6,000 gallons (8,570 gallons x 70%). 
 
   

City Sales Tax

 
  SalesTax 
 

The annual amount that the average Tempe residential household will pay in City of Tempe sales tax is estimated to be $560 for 2015.

For this analysis, we utilized the Phoenix metropolitan area median household income of $62,983 per the U.S. Census Bureau, 2013 American Community Survey.  As median incomes can vary between the cities, the Phoenix metropolitan area median household income was utilized so that a direct comparison could be made between cities.

The portion of this income that was spent on taxable purchases is estimated at 49% ($31,114), as noted in the latest Consumer Expenditure Survey published by the U.S. Bureau of Labor Statistics (May 2015).  We assumed that the portion of the median income spent on taxable purchases was spent within the household’s city of residence and applied to each city’s applicable sales tax rate.

Please note that many of the comparison cities in the analysis utilize different tax rates for various taxable activities.  For example, the City of Glendale has an overall sales tax rate of 2.9%; however, sales at restaurants and bars are taxed at 3.9%.  These variances were taken into account when calculating the annual amount of sales taxes paid.
 
     

City Property Taxes

 
  PropertyTaxes
 
The annual estimated City of Tempe property tax amount is $309.  The property tax amounts shown above are based on each city’s FY 2015-16 primary and secondary rates and each city’s 2015 Limited Property Value (LPV) for the median single family home.  Starting in FY 2015-16, Proposition 117 requires the use of the LPV in levying both primary and secondary property taxes.  The median single family LPV for each city, per the Maricopa County Assessor, is as follows:  
Glendale
Phoenix
Mesa
Tempe
Peoria
Chandler
Gilbert
Scottsdale
$82,121
$83,265
$103,950
$122,622
$125,549
$147,032
$157,889
$236,355
   
It should be noted that the City of Mesa and the Town of Gilbert only levy a Secondary Property Tax.

Summary of Utility Rate Increases

Most cities and towns in the study review rates on an annual basis to determine if there is adequate cost recovery and whether a rate increase is required.  Listed below is a summary of the utility rate adjustments as of July 2015 and information related to any planned future rate increases:
Overview of Rate Adjustments
  Date of Last Change in Rates or Fees
  Water Wastewater Solid Waste
Chandler October 2013 October 2013 July 2007
                Wastewater rates will increase 9.0%, solid waste rates will increase 6.0% and water rates will no longer be seasonal as of October 2015.
Gilbert July 2009 July 2009 July 2012*
  No rate increases planned at this time.  Solid waste rates for residential customers were reduced in July 2012.
Glendale July 2010 July 2010 July 2008
  No rate increases planned at this time.
Mesa  July 2015  July 2015 July 2015
  Water, wastewater and solid waste rates were increased 5.0% as of July 2015.  An annual rate increase is being proposed for each year through 2017.
Peoria July 2015 July 2015 July 2012*
  Rates were increased by 2.5% for water and wastewater in July 2015, and will be increased by another 2.6% in July 2016.  Solid waste rates for residential customers were reduced in July 2012.
Phoenix July 2015
March 2010 March 2009
  Phoenix raised its water rates in July 2014, but the increases did not affect the average residential customer.  However a new “City Services Tax” was introduced in late July 2014 that increases the annual water bill by $18.00.
Scottsdale July 2013 July 2015 July 2009
                
Scottsdale raised its water rates in July 2015, but the increases did not affect the average residential customer. The base meter fee for wastewater was increased by $0.50 in July 2015.
Tempe January 2014  January 2014  November 2009 
  Water rates were increased 2.2% in January 2014.  Wastewater rate changes created a reduction for the typical residential customer.  Rates are reviewed annually, and rate studies are conducted regularly to determine future rate increases or decreases.
   
* Rates for residential customers were reduced.