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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 />raise revenue or to defray increased <br />municipal costs, such as maintenance and <br />reconstruction costs, accruing as a result of <br />utility operations, or both. <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 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 />Under current law, cities are permitted to <br />engage citizens when discussing a new or <br />renewed franchise fee arrangement in the <br />manner that best fits the community. A <br />recent legislative proposal would have <br />added a prescriptive notification and reverse <br />referendum requirement to the process of <br />imposing or renewing a franchise agreement <br />with a gas or an electric utility. <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. The <br />League opposes adding a one -size -fits -all <br />notification requirement and a reverse <br />referendum procedure to the gas and <br />electric franchise fee process. In addition, <br />in situations where a local provider <br />decides to sell their operations, the city <br />must have the right of first refusal to <br />purchase the assets of the utility. <br />FF-21. 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 />League of Minnesota Cities <br />2018 City Policies Page 114 <br />