When Floridians pay their monthly water bills, most assume the money is going toward clean drinking water and maintaining the maze of pipes underground. However, a new report suggests those funds are frequently being siphoned off to plug holes in municipal budgets, leaving critical infrastructure at risk of collapse.
Florida TaxWatch (FTW), the state’s independent government watchdog, released a scathing analysis Tuesday targeting the practice of “sweeping”—where municipalities take net revenues from public utilities and transfer them into their General Fund instead of reinvesting the cash into the water system or lowering rates for customers.
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The report, titled Transferring Utility Profits to a Municipality’s General Fund Increases the Risk of Undercapitalization of Water Assets and Violate Taxpayer Accountability, argues that this financial maneuvering essentially functions as a hidden tax. By diverting utility profits to pay for police, parks, or general administration, cities can artificially keep property taxes low while passing the burden onto utility ratepayers.
“Keeping property taxes low often means higher municipal utility rates to balance the general budget, a habitual practice that burdens utility customers with cross-subsidies and normalizes underinvestment in much-needed infrastructure maintenance,” said FTW President and CEO Dominic M. Calabro.
Calabro noted that when these transfers occur, they stop being fees for a service and start looking like a tax that violates basic accountability standards.
The “Outsider” Problem
The report highlights a specific grievance for residents who live just outside city limits. While publicly owned utilities make up less than a third of the state’s 1,600 drinking water systems, they serve a massive 86 percent of Florida’s population. This means millions of Floridians purchase water from a municipality they do not live in.
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Jeff Kottkamp, FTW Executive Vice President and General Counsel, described this dynamic as “taxation without representation.”
“When the municipal utility sweeps utility profits to their General Fund, the customers who live outside the municipality’s boundaries have no vote in how that money is collected or spent,” Kottkamp said.
Crumbling Infrastructure
Beyond the fairness of the fees, the report warns of a looming physical crisis. As Florida’s water infrastructure ages, the cost to maintain it is skyrocketing. TaxWatch argues that every dollar transferred out of a utility system is a dollar that isn’t being spent on upgrading treatment plants or replacing old pipes.
To combat the issue, Florida TaxWatch is urging the Legislature to consider several reforms, including:
- Banning the Sweep: Introducing legislation similar to 2020’s HB 653, which would require utility revenues to be spent exclusively on utility operations and infrastructure. This is already the rule for private utilities regulated by the Public Service Commission but does not apply to government-run systems.
- Fair Market Value: Adjusting accounting rules to recognize the full market value of utility systems, encouraging investment and potentially allowing private companies to buy failing municipal systems at a fair price.
- Transparency: Requiring government-owned utilities to file standardized annual financial reports detailing exactly how much money is being transferred out and how much debt they are carrying.
- Consolidation: Encouraging smaller, struggling water systems to merge or regionalize to improve service reliability and cut costs through economies of scale.
The group hopes these measures will stop the “patchwork” of consumer protections that currently depends entirely on who owns the pipes running to a resident’s home.
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