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# 7 INTRODUCTION OF UTILITY FRANCHISE FEE ORDINANCE By: Ryan R. Schroeder Background: In each year (except 1995) since 1991, staff has proposed implementation of a Franchise Fee ordinance against revenues generated by the gas company and two electric companies within the City of Ramsey. The two electric companies have not opposed implementation of such a fee. The gas company, alternatively has taken a long-standing position against implementation of franchise fees. In our area, Coon Rapids has had a franchise fee (gross earnings tax) since the 1970's. The City of Anoka just approved a fee charged against kilowatt hours (expected to result in revenues at about 3% of gross earnings). Mounds View implemented a 3% fee two years ago. Minneapolis and St. Paul each have franchise fees. Columbia Heights apparently has a 3% fee. Several other cities from around the state have also implemented franchise fees but we are not currently aware of others in our immediate area. We currently charge the cable company a 5% fee which resulted in $45,309 in revenue to QCTV in 1995, and an expected $50,000 in 1996. The stated rationale for implementation of franchise fees generally is 1) to provide a stable revenue source; 2) to be able to target from where these revenues are raised in a manner other than occurs with the general property tax; 3) to provide for reimbursement for the use of the rights-of-way that is donated without charge to the utilities; and 4) to provide for administration of services provided to the utility companies for such as curb and pavement cuts and other maintenance activities. In Ramsey's case, we do not currently charge the utilities for any services although we continue to make them responsible to ensure pavement patches do not negatively impact the drive surface. At the end of 1995, the City owned 138.16 miles of fight of way. At $0.50 per square foot, that results in a land value of $24,000,000. The pavement generally utilizes half of the right-of-way with the balance utilized for utility placement. Other than construction budgets, the Public Works maintenance budget, and the Public Improvement Revolving Fund are dedicated toward maintenance and repair of the fight-of-way. The maintenance budget in 1996 is $652,617 of which $587,643 is specifically for street maintenance ($108,000 of which is for the sealcoating program). It seems clear that a significant portion of the City budget is for maintenance of our rights-of-way, a portion of that includes services granted directly or indirectly to the utility operations (both public and private). Further, the Public Improvement Revolving Fund supports deficits within project funds and provides for the street maintenance program City portion (and the float for the assessment portion until receipt of assessments). We have discussed in the past the possible desire to provide an improved funding source for the public improvement revolving fund in order to enhance the City participation in the sealcoating program and, more recently, in order to cover deficit project funds. Over the next five years, the assessment portion of the sealcoating program is projected to average roughly $180,000. A franchise fee against AEC/Minnegasco revenues against the class of property generally benefitted by the sealcoating program (residential) at the rate of 3% is projected to raise $185,000/year. If Council approves of the levy of a franchise fee we would need to discuss further if proceeds from this revenue source are to be dedicated to the sealcoating program and, if so, to what degree. It also needs to be determined when the fee would be initiated (the proposed ordinance has an effective date of April, 1996, which reduces the 1997 expected yield to