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with facilities occupying the public streets <br />and highways compensate the city for the <br />use of a valuable public asset and/or for the <br />increased maintenance and reconstruction <br />costs associated with having facilities in the <br />right-of-way. <br />State law currently allows the franchise fee <br />to be based upon gross operating revenues <br />or gross earnings of the utility from its <br />operations in the municipality. In this <br />manner, all utility users within the <br />municipality contribute to the public costs <br />associated with the utility operation. In the <br />absence of franchise fees, municipal costs <br />resulting from utility operations are <br />currently being funded through the property <br />tax, which is being paid for by property tax <br />payers. <br />Many cities also have policies related to <br />utility company services and products that <br />could be supported under conditions of a <br />franchise agreement, such as local <br />renewable energy and energy efficiency <br />programs. Current statutes do not explicitly <br />provide city authority to include those types <br />of performance conditions in a franchise <br />agreement. <br />Response: Municipal authority to collect <br />franchise fee revenues from utilities is an <br />important and equitable mechanism to <br />offset the costs of maintaining public <br />right-of-way and to generate a return on <br />a publicly held asset. Municipal franchise <br />authority must be preserved and should <br />be expanded to allow city policy priorities <br />to be addressed through conditions in <br />franchise agreements that have the cost <br />covered by local ratepayers, where <br />appropriate, and can be accomplished <br />within the local franchise boundaries. In <br />addition, in situations where a local <br />provider decides to sell their operations, <br />the city must have the right of first refusal <br />to purchase the assets of the utility. <br />FF-20. Utility Valuation Transition <br />Aid <br />Issue: In 2007 the Minnesota Department <br />of Revenue revised its rules regarding the <br />valuation of electric and natural gas utility <br />property. This change in the rules resulted <br />in valuation changes for utility property that <br />dramatically reduced the amount of revenue <br />that local governments will collect in <br />property tax from these utilities. <br />Recognizing that the communities that host <br />these utilities bear extraordinary burdens <br />connected with stress on local infrastructure, <br />public safety, and public nuisance due to the <br />presence of these facilities in their <br />communities, the Legislature created the <br />Utility Valuation Transition Aid program. <br />This program compensates host <br />communities that have lost more than 4 <br />percent of their net tax capacity as a result of <br />Department of Revenue's rule changes. <br />Response: The League of Minnesota <br />Cities supports the continuation of the <br />Utility Valuation Transition Aid program <br />and opposes any efforts to change <br />statutory language or to divert promised <br />funds away from host communities for <br />any purpose. If the Legislature does <br />determine that it is necessary to re- <br />allocate the funds in the Utility Valuation <br />Transition Aid program for another <br />purpose, the League supports other <br />legislative efforts that would compensate <br />the host communities for the economic <br />and environmental costs of hosting these <br />facilities thought reimbursement from the <br />investor owned utilities. These other <br />efforts could include, but are not limited <br />to, increasing the class rate on utility <br />property to the extent that it would offset <br />the negative effects of the utility valuation <br />rule change. <br />League of Minnesota Cities <br />2015 City Policies Page 104 <br />