The City of Inver Grove Heights City Council is considering whether to implement a franchise fee in 2018. A franchise fees on utilities (gas and electric) would help fund the unfunded costs relating to city streets, parking lots and trails. A franchise fee is collected by 357 cities out of 853 cities in Minnesota. There are 101 cities in the 7-county metropolitan area that currently have franchise fees. Implementing franchise fees has become a common way for a city to raise revenue.
What does that mean for Residents?
Utility companies have the right to pass franchise fees on to their customers. If implemented, utility customers would likely see an increase on their gas and electric bills noted as a “City Fee.” The utility companies would collect the franchise fees and remit them to the City.
The current proposal is to add a $2 fee per month, per account on residential gas bills and a $2.75 fee per month, per account on residential electric bills. That means residential utility customers would see total fees of $4.75 per month. Commercial rates are proposed to vary based on the utility company’s account class. The commercial fees will range from $13.50 to $195.
Why does the City need to implement a Franchise Fee?
The proposed franchise fees will generate approximately $1,000,000 in revenue annually that will help the city cover unfunded costs relating to city streets, parking lots and trails. On average, the city needs $4,150,000 per year for the next five years to cover costs not paid for from taxes, special assessments or other funding sources. Franchise fees will help offset the associated costs without increasing property taxes. Utility franchise fees would apply to all utility customers in the city regardless of whether they pay property taxes. This includes non-profit organizations, schools, churches and government customers. Thus, these fees are more equally distributed than property taxes.
If a franchise fee is not approved by the council another financing option is to increase the tax levy by approximately $1,000,000 dollars.
Here are examples of adding approximately $1,000,000 to the tax levy:
•A business with a taxable value of $563,700 would see a monthly tax increase of $14.32.
•A business with a taxable value of $3,058,200 would see a monthly tax increase of $82.19.
•The mean residential property with a taxable value of $231,176 would see a monthly tax increase of $5.14.
•The median residential property with a taxable value of $194,834 would see a monthly tax increase of $4.33.
The City of Inver Grove Heights has 30 years of award winning transparent financial reporting. The city understands the importance of providing timely, accurate and transparent fiscal information. In an effort to be transparent, franchise fees will be reported in a separate fund called the Franchise Fee Special Revenue Fund. All projects paid for out of this fund will be reported.
Franchise Fee Calendar
6/5/2017 City Council Work Session
6/19/2017 City Council Special Meeting 6:00 p.m. to discuss uses
7/10/2017 City Council Meeting 1st Reading of Ordinance
7/10/2017 Call for Public Hearing
7/14/2017 Publication on website to provide additional notice
7/30/2017 and 8/6/2017 Publication in Southwest Review to provide additional notice
8/10/2017 River Heights Chamber Local Issues Meeting
8/14/2017 City Council Meeting Public Hearing and 2nd Reading of Ordinance
9/11/2017 City Council Meeting Continuation of Public Hearing and 3rd Reading of Ordinance
9/17/2017 Ordinance Publication in Southwest Review
9/18/2017 Send Ordinance to Dakota Electric and Xcel Energy
10/1-12/31/17 Xcel Energy requires receipt of ordinance at least 90 days prior to implementation
1/1/2018 Proposed Implementation of Franchise Fees
4/2018 City Collects 1st Quarter Franchise Fees from Dakota Electric & Xcel Energy
Franchise Fees billed January and February
Franchise Fees collected February and March
Franchise Fees remitted April
If you would like to share your comments and hear more about Franchise Fees the Council will discuss whether to implement Franchise fees at the following City Council Meetings:
July 10, 2017 @7:00PM First Reading of the Franchise Fee Ordinance
August 14, 2017 @7:00PM Second Reading of the Franchise Fee Ordinance and Public Hearing
September 11, 2017 @7:00PM Third Reading of the Franchise Fee Ordinance and Public Hearing
City staff and Council representatives will appear at the River Heights Chamber meeting:
August 10, 2017 @ 8:00AM