Minutes - Council - 11/12/1996 - Laserfiche WebLink

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Case #7: Introduction of Utility Franchise Fee Ordinance City Administrator Schroeder stated that each year for the past several years, the Council has discussed a utility franchise fee as another revenue source for the City. It is generated by electric and gas utilities in the community and is similar to the 5 percent fee paid by Cable companies. A major issue in the past is how increased revenue would be used. Before 1991, the City assessed 100 percent of the cost ofsealcoating maintenance to the benefitting property owner. Since 1991 and 1992, the City has contributed half of that cost from the General Fund with the other half funded through a Street Benefit Assessment Program. It is proposed that with the increased revenue, costs of sealcoating could be eliminated. Currently, sealcoating averages between $150,000 and $200,000 per year. The City pays its 50 percent share from interest earnings and other revenue from the Public Improvement Revolving Fund. This franchise fee would enable the City to cover the total cost of the sealcoating street maintenance program. This would amount to an average of a 5 percent tax levy reduction to citizens over the life of the program. Mr. Doug Fountain, 15255 Garnet Street NW, stated that this is the proposal that was brought forward by the utility companies. Mr. Schroeder did not state specifically that the increased revenue would be dedicated to street maintenance, and he asked if there is something wrong with the system and why this measure is being considered. Mayor Hardin explained that although the Council has not chosen to act on charging a utility franchise fee, as budget dollars decrease this is a recognized, viable source of revenue that has been considered for a number of years. Mr. Fountain stated that he would only support the measure if the increased revenue was specifically dedicated to street maintenance. Councilmember Beyer noted that she has previously stated that the City must look at alternative methods of bringing in revenue, and this is one. State and federal governments place unfunded mandates on cities, and the City has to raise revenue to pay for them. This is an alternative source of revenue to continue services that the City is required to provide. Councilmember Peterson stated that he has recommended in the past that commercial and industrial properties not be charged at the same rate. Although they would not be charged the same percentage, their participation would be equivalent because their property taxes are higher. City Administrator Schroeder stated that residential customers would pay a higher percentage rate than commercial and industrial properties, so that there is long-term tax stability that promotes commercial and industrial growth. The .3 percent charge to commercial and industrial properties is an inverse relationship to the tax differential because the average tax rate on commercial and industrial property is 4.6 percent; the average for residential properties is 1.36 percent. Mr. Fountain stated that if the revenue is to be dedicated to the relief of street maintenance assessments and written into the ordinance, he will support it. City Council/November 12, 1996 Page 11 of 15