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In addition, Minn. Stat. § 469.190 should <br />amended to allow cities to impose up to a <br />five percent local lodging tax and to allow <br />cities to modify the uses of their local <br />lodging tax revenues to meet local needs. <br />Cities should also have general authority <br />to create utilities, similar to the storm <br />sewer utility authority, in order to fund <br />local services where benefit or usage of <br />the service can be measured. <br />FF -20. City Franchise Authority <br />Issue: Under Minn. Stat. ch. 216B and <br />Minn. Stat. § 301B.01, a city may require a <br />public utility furnishing gas or electric utility <br />services or occupying streets, highways or <br />other public property within a municipality <br />to obtain a franchise to operate within the <br />community. In addition, cable system <br />operators are required to obtain a franchise <br />under Minn. Stat. ch. 238. <br />Under a franchise, the city may require the <br />utility to pay a fee to the municipality to <br />help offset public maintenance costs for the <br />public property and generate a return on a <br />publicly held asset. The fee is intended as a <br />mechanism by which gas or electric utilities <br />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 -21. Utility Valuation Transition <br />Aid <br />Issue: In 2007 the Minnesota Department of <br />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 />League of Minnesota Cities <br />2016 City Policies Page 105 <br />