Bloomington Imposing Franchise Fees for Road and Trail Maintenance

Everyone wants well-maintained roads and public walkways. The support for bike trails, while not universal, is vocal and gaining some popularity.  So you would think that these services might be a priority use of current Bloomington tax funds.

However, you’d be wrong.  The Bloomington City Council recently singled out a specific portion of Bloomington street Bloomington_St_Maint_1.pngmaintenance (street overlays) and all of its trail maintenance for new funding above and beyond the current city budget.  They decided to impose a flat monthly $3.75 per meter /address “city franchise fee” on both Xcel Energy (electricity) and CenterPoint Energy (natural gas) bills, starting in March 2016. These get directly passed along on the billing statements, so this adds up to $90 more per household (more for businesses, churches or nonprofits) per year in taxation hidden as a fee.  

Say, What??  Those new “franchise fees” that will be added to your gas and electric bills have got nothing to do with natural gas or electricity production or delivery of services.  They are a tax increase masquerading as a utility fee.

As reported in the Bloomington Brief newsletter from the city:

“Bloomington residents will pay a total of $7.50 per household—$3.75 through Xcel and $3.75 through CenterPoint—each month. By dedicating the franchise fees to street overlays and trail maintenance, residents will know exactly why the fee is being collected and where the money is being spent,” City Engineer Shelly Pederson said.  

Except by state law, the utility companies are not required to spell out what the fees are really for.   The CenterPoint Energy bill that Bloomington residents just received states only

"The City of Bloomington granted CenterPoint Energy a franchise to operate within the City limits.  A Gas franchise fee of $3.75 per Meter will be collected from customers effective 0301/2016.  The line item appears on your bill as 'City franchise fee'.  CenterPoint Energy remits 100% of this fee to the City of Bloomington."

It could be worse.  The Mayor favored routing these fees to the city’s “discretionary spending” budget.  The Council decided to be a bit more circumspect.

WHAT IS THE IMPACT TO THE BLOOMINGTON TAXPAYER?

The Bloomington city government holds that the impostion of these franchise fees is actually a benefit to city tax payers.  As a result of adding another funding source  for Bloomington’s Pavement Management Program (PMP), the City’s Chief Financial Officer Lori Economy-Scholler claimed that the proposed 2016 tax levy was reduced by $550,000.   

In fact, the fees simply reduced the size of the proposed 2016 property tax increase.  Otherwise, to collect that added $550,000 the city would need to raise property taxes by 6.85% rather than 5.75%.  The city’s website notes “After months of budget meetings, the City Council adopted a property tax levy increase of 5.75 percent to $52,845,152. This means the monthly cost of tax-supported services for the owner of a $219,700 median value home is $74.73 for 2016.  The increase of $3.09 per month from 2015 is the result of several initiatives and adding back the fire pension levy. “

So, let’s do the math. The $ 7.50 per month of “franchise fees” amounts to a hidden 14% increment in costs to the homeowner for payments to the city.

WAS THIS REALLY NECESSARY?

Let’s assume that there were no possible offsets in the city’s budget to cover this $550,000  requirement.  Note that the street overlay costs have been covered in the city’s PMP budget in the past, but the cost of maintaining all of the city’s trails and paths is apparently a new requirement.  Would franchise fees of $90 a year be required to cover this shortfall?  

Hardly.  The city has estimated the revenue, based on customer counts provided by Xcel and CenterPoint, as over $4.9 MILLION per year.

Bloomington clearly assumes that street overlay, path and trail maintenance costs will be going up exponentially.  We want to explore these assumptions in a subsequent article.  We have asked Bloomington City Council member Jack Baloga, who voted for the imposition of the franchise fees, to help us to better understand the situation.  We hope that we’ll soon have his response to share with you. 

If you want to look ahead, here’s a link to how Bloomington presented the pavement maintenance needs and alternatives in November 2015

https://www.bloomingtonmn.gov/sites/default/files/media/Franchise%20Fees%20Open%20House%20Nov%204%202015.pdf

And here’s how the city explained the 2016 tax levy https://www.bloomingtonmn.gov/about-bloomington/news/city-council-approves-2016-tax-levy-2016-01-29

TO BE CONTINUED

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  • commented 2016-04-26 19:46:49 -0500
    forget passing more taxes on us-such as franchise fees-why don’t you give us some of the surplus money you get. We could sure use some extra money instead of being taxed to death. Everytime you need money u get it from us. U need to cut corners just as we do
  • followed this page 2016-04-26 18:30:39 -0500

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