City Council continues franchise fee exploration for 2013
Plymouth scrounges for funds in light of major upcoming street projects
The combined $31 million proposed Peony Lane and Vicksburg Lane extension project continue to plague the city due to lack of state aide and funding challenges. Plymouth City Council held a special meeting Nov. 20 to discuss options.
The council has been entertaining the prospect of franchise fees and continued to explore the possibility at the meeting.
Plymouth expects to take on roughly $17 million in debt due to both extension projects, which would require annual payments of nearly $2 million.
“We are going to have a really hard time funding these major projects without some kind of franchise fee,” said Ward 4 Councilmember Ginny Black.
Franchise fees are attached to residents’ utility bills as a way of building general revenue. While Plymouth has not been utilizing the fees, they stand as an untapped resource.
Numerous cities in the area employ franchise fees, including Minnetonka, St. Louis Park, Edina, Golden Valley and Hopkins.
As an example, St. Louis Park implemented electric and gas franchise fees at $2 per residential connection in 2005. With a proposed 50-cent increase in 2013, St. Louis Park would create $1.35 million in revenue dedicated to maintain and repair the street system.
Dave Callister, Administrative Services Director, illustrated that if Plymouth implements a similar fee, the city could bring in a total of $2 million annually through the approximately 33,550 electric and 25,000 gas connections in town.
“[Franchise fees] cover situations where utilities use our right-of-ways for their infrastructure,” said Callister. “With a fee, the utilities would not pay other permit fees for digging. It’s a trade off. Fees can be figured on percentage of revenue or a per meter charge.”
Callister’s presentation cited advantages such as maintaining a stable tax rate and service levels and disadvantages such as fees being unpopular and perceived as another form of taxation.
“This is a tool that we can use. I call it a tax, [some] can call it a fee,” said At-Large Councilmember Tim Bildsoe. “This is a vehicle for us to capture funds from a broad group of citizens.”
The council ultimately asked city staff to continue pursuing fees.
Plymouth would have to open negotiations with its utilities and amend existing agreements.
“To me there’s no downside with having the staff starting to talk with companies about negotiating methods and providing for franchise fees,” said At-Large Councilmember Jim Willis. “Let’s get it in the language of the franchise agreement, then we can act on it either way we go.”
The council requested staff begin work with Xcel Energy, Wright Hennepin Cooperative Electric Association and CenterPoint Energy to change current agreements to allow for fees. Callister said this process typically takes about three months.
“I think it’s worth considering. We haven’t raised the tax rate for three years and we might not even do it for next year,” said Bildsoe. “We’re looking at an additional $2 million cost [annually] for the road improvements we need to make. I don’t want to raise property taxes, and I think this is fair. Everybody pays this fee for the roads everybody uses.”
If franchise fees are implemented in Plymouth, the revenue can be used for any purpose.
The city is not required to hold a public hearing or give notice of the fees, although Callister’s presentation highly recommended it.
Were the ordinance enacted, utility companies would implement the fee within 60 days and it would show up on residents’ utility bills under the header “Franchise Fee.”