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August 14, 2018

12/22/2017 2:42:00 PM
North Branch Council sets franchise fees on 3-2 vote

The franchise fee was adopted last week on a split vote of the North Branch City Council, after about 90 minutes of discussion on estimated revenues for a variety of fee structures.  Council looked at revenue from a fee of $5 solely on electric franchise customers, or doing $3 and $3 on electric and gas franchise accounts and other configurations;  before settling on a fee of $3.50 for electric and $2 for natural gas utility subscribers.  

Council members Jim Swenson and Robert Canada were the no votes.

 The fee is proposed to be collected based on the number of  “primary service meters” at any one subscriber address. In cases of multiple units off one meter or a large
industrial/commercial  use and apartment buildings-- if there’s one meter and the usage is in the multiple thousands of kilowatt hours, these utility customers will pay a “commercial or large user “ fee, which will be based on a multiplier of the $3.50 and $2 single meter rates.  

The multiplier was not set yet.  

Otherwise, residential customers and small businesses are expected to be paying the single “small user” franchise fee at the amount adopted.  

Plus,  there’s a “medium” user category, approximately around 5,000 kilowatt hours, that pays an in-between fee at a multiplier, also not yet adopted.

The utility companies are all agreeable to developing a billing system, according to City Administrator Renae Fry.  There’s still agreements that need to be drafted and the actual fee ordinance written,  that will all come to council in January 2018.  The first fee won’t show up on North Branch utility bills for months yet, as the process is refined.

Fry said complicating matters somewhat,  is the fact there are utility customer structures that pay property taxes in the City of North Branch-- but that carry other zip codes (ie Harris) and the utility companies have to workout a billing system for these.

Before the vote:  the city council observed a powerpoint presentation from Council member Robert Canada,  who felt the fee should have a sunset date of six years.  Canada showed in his materials how the city’s levy and spending are affected over the coming years,  as debt service obligations decline. He projected that the monies now paying off debt will then become available and could be redirected into streets-- which is where the franchise fee revenues are being put.  

The council started looking into franchise fees because in past years, the property tax levy was being held steady with a good portion of the city’s income going into debt.  Council member Canada said the debt service line items could be shifted when the borrowing is paid off, to cover what the fee generated and the fee can go away.

Council member Canada’s analysis, however,  was termed a little bit simplistic, by City Finance Director Richard Hill.  

It’s like paying off your house mortgage and planning on having that money to “save.”  But your car payment, cost to buy household items, insurance policies and other fixed costs have incrementally increased. That house payment money is not as valuable as it was.

Hill explained the city budget won’t remain static over Canada’s proposed fee lifetime of six years.  There will be inflation in capital and equipment replacement costs, operating expenses,  and personnel costs.  

Adopting the 2018 budget and levy, council voted 4-1, with Canada opposed.

The increase in the levy for 2018 is 4.6 percent.  

Depending on your property value going up or down this translates to different percentages on your tax bill.  The tax statements mailed out already, were calculated based on the September maximum that councils adopted, so the actual property tax bills do change with the final statement.

North Branch is asking for $202,283 more from its city taxpayers in 2018.

Council member Swenson noted that the 4.6 percent hike is the only way the city can start addressing needs that have been deferred for years, and will help “get things under control again” fiscally.

Some examples of the debt burden, as budgeted for 2018:
~ Chisago county partnered with North Branch to buy the multi-use business park/ESSBY, now dubbed Interstate Business Park,  and North Branch is paying the county back at $220,000 annually.

 ~ The I-35 freeway bridge and interchange area improvements are costing $44,000 annually in debt service.

~ Improvements to ESSBY infrastructure and extending services, debt service is $270,000 annually.

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