Cost of Services

Each year the 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 January 2012. The analysis assumed the same household consumption averages for all cities for both water and wastewater services. However, for property tax purposes, we utilized the median single family home value in each respective city 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

For 2012, the average City of Tempe residential household is estimated to spend $1,736 annually for water, wastewater and solid waste services as well as City of Tempe property and sales taxes. The City is ranked 5th overall in comparison to the other cities in the survey.

Solid Waste

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 January 1, 2012.

Water and Wastewater

The annual total amount for water and wastewater services for a single family residential customer in the City of Tempe is estimated at $679. The annual water charge is based on an average single family residential monthly water consumption of 12,700 gallons. It is assumed that this water consumption average 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 January 1, 2012 to derive the annual water costs.

The wastewater charges noted above are based on an average residential water inflow of 8,300 gallons. This average is based on calendar year 2011 water consumption rates for the months of January, February and March (winter month average). This represents a decline from an average residential water inflow of 9,600 gallons for calendar year 2010. It is assumed that this winter average is applicable to the other cities in the comparison. As such, this water inflow amount was applied to each respective city’s wastewater rates as of January 1, 2012 to derive the annual wastewater costs.

City Sales Tax

The annual amount that the average Tempe residential household will pay in City of Tempe sales tax is estimated to be $551 for 2012.

For this analysis, we utilized the Phoenix metropolitan area median household income of $58,497 per the U.S. Census Bureau, 2010 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 each city.

The portion of this income that was spent on taxable purchases is estimated at 48% ($27,977), as noted in the latest Consumer Expenditure Survey published by the U.S. Bureau of Labor Statistics (September 2011). 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 2.2%; however, sales at restaurants and bars are taxed at 3.2%. These variances were taken into account when calculating the annual amount of sales taxes paid. In addition, the Tempe calculation takes into account the temporary 0.2% increase in sales tax approved by the voters in May 2010.

It is important to note that the estimated amount of sales taxes paid for 2012 is less than the estimated amount reported in the 2011 analysis. This is due to the fact that the U.S. Census Bureau reported a decline in the median household income between the two years.

City Property Taxes

The annual estimated City of Tempe property tax amount is $266. The property tax amounts shown above are based on each city’s FY 2011-12 primary and secondary rates and each city’s 2011 Full Cash Value (FCV) for a median single family home. The median single family FCV for each city, per the Maricopa County Assessor, is as follows:

It should be noted that the City of Mesa and the City of Gilbert only levy a Secondary Property Tax.

Summary of Utility Rate Increases

It was noted that 4 of the 7 other cities in the analysis increased water and/or wastewater rates during calendar year 2011. Also, it appears that all of the cities in the analysis will be reviewing water and wastewater rates for potential increases in calendar year 2012. Listed below is a summary of the utility rate increases: