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AnnMarie Brink - US Bank

home : news : news August 22, 2017

8/4/2017 2:23:00 PM
North Branch Council is considering surcharge on energy bills for roadwork

Elected officials in North Branch hope to hear from residents on whether “franchise fees” are an idea whose time has come.  

Franchise fees are set as either a percentage of your gas and electric bills or can be a flat monthly sum.   Fees would be collected by utilities providing service in North Branch.  
Dozens of metro area cities have embraced franchise fees.  Some only collect based on electric consumption. Others  tie them to both gas and electric customers.  

The preference would be for North Branch to set the fees in motion as part of next year’s revenue stream.

State law provides for cities to charge these fees when utilities have a franchise to use city rights-of-way to deliver services.  The main advantage to using fees, council learned,  is that they are spread over a greater number than say property tax-- which isn’t paid by schools, non-profits, etc,

Money raised will go towards road work.  Fee revenue can off-set the impact of the assessment option. (Another option for revenue is a local sales tax designated for road work, but this isn’t on the council table.)

The utilities collect and then remit the revenue to their cities.    This concept has not been challenged by utilities because, as the Burnsville MN city website puts it; companies have felt this is a local political decision.

North Branch’s engineering firm WSB and city engineer Lee Gustafson were asked early in 2017 to analyze priorities for pavement management and estimate a budget and report.  Gustafson told council last week there’s a good case to be made to recommend  $6 per month as a fee.  This shouldn’t be looked to as a windfall,  but will help “catch up” in tackling deferred road projects.

Gustafson said North Branch  has 70 miles of paved roadway and 105 road miles in total.  

He added that council has budgeted only what it gets in municipal state aid for streets for a while now,  mostly due to tax dollars having to go into covering North Branch debt incurred well over a decade ago.  

Elected city officials years ago built a fire hall and created city hall out of a former bank, they ventured into economic development with purchase of land for Interstate Business Park and extended streets and infrastructure.  Equipment Certificates had to be issued to buy public works machinery, etc.  

As early as 2010, North Branch started dedicating almost half its annual levy to debt and money expended for assessment improvements it was basically paying itself for.  In 2014 and 2015--  51 and 53 percent of the levy went to debt.  This year it is 42 percent.

Council member Robert Canada opposed the fees and alluded to this debt. The  future financial projections show the burden decreases significantly for North Branch about five years out.  

Canada said, “We’re getting close (to debt payoff) and I don’t see the equity in this (fee).”

He noted, for example propane customers and other alternative energy consumers won’t be billed.

The city still needs money.  Kelly Neider asked, “...if we don’t do this, what are we going to do?”

Jim Swenson said he wants to hear from residents, adding,  “We have to look at something.”

The council voted 4-1 with Canada opposed, directing staff to start a public education effort, set up a system for  input, schedule an informational meeting or two and in general “engage the public” leading to future action on franchise fees.



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AnnMarie Brink - US Bank

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