consultants are sandburs

Wednesday, October 09, 2013

RAMSEY - FRANCHISE FEES - Examples and thoughts.

The Mankato City Code Franchise provision is online here, and in relevant part states:

7.000 Franchise Fee.
7.1. Reservation of Rights.
The City reserves all rights under Minnesota Statute § 216B.36, to require a franchise fee at any time during the term of this franchise. If the City elects to require a franchise fee it shall notify Company and negotiate in good faith to reach a mutually acceptable fee agreement. The fee terms shall be set forth in a separate ordinance and not be adopted until at least 60 days after notice enclosing such proposed ordinance has been served upon the Company by certified mail. If the City and Company are unable to agree on a franchise fee or on any terms related thereto, each hereby consents to the jurisdiction of State District Court, Blue Earth County, to construe their respective rights under the law, subject to all rights of appeal.

That is an example of placeholder language should City of Ramsey decline a present franchise fee but wish to preserve rights over the term of a franchise grant.

Hopkins, online here, has an example of a tiered structure of the kind former council member Mary Jo Olson suggested at yesterday's council public meeting, (where the issue was tabled for further consideration and later resolution). Click the thumbnail images to enlarge and read:


As stated, Hopkins elected to impose an "account-based fee on each premise and not a meter-based fee." Thus Hopkins acknowledges alternative methods, however, nothing in any statute yet found mandates that a utility must flow through a fee in manners and amounts a city imposes on a utility. With that worry, the franchise renewal/modification ordinance Ramsey passes must specify a mandated flow-through situation, or gamble, presuming negotiation with Connexus does not stall on such an issue.

With Flaherty's thing involving individually metered units, it might be best to have a per meter, vs per property fee imposition, if there is to be one at all. Per meter of course being different than a consumption based fee, looking beyond the meter to its readings over time.


This online memorandum is valuable background for all, on utility franchise renewal options and negotiation possibilities, while at the start reviewing statutory status.

For purposes of illustration, these examples suffice. Clearly they do not exhaust all creative possibility available to Ramsey. Meter-based fee imposition has its benefits and drawbacks. If consumption-based rather than a monthly per meter flat fee, it would to a very minor degree encourage energy conservation, but a suggestion was made at the public hearing, in staff and counsel discussion if I recall correctly, that utilities prefer flat fee per-account [or per meter] imposition of franchise fees.

Why? Who knows?

It may not be true. Connexus was not at the public meeting, or if there via representatives they declined to express any opinion re preferences on the record.

A blend, making a per-account based fee scaled to value of the property would rope in the properties exempt from property taxes, and would otherwise parallel levy upon assessed value of a property. However, doing that makes the fig-leaf over evasion of levy limits really, really small - approaching nonexistence. A bare-naked end run of levy limits is what it would be, with churches and church owned land subject to a fee pass through while they dodge being taxed; so there is some virtue to doing it that way despite the vice that levy-limit evasion is arguably a bad thing.

Also, there is no credible logic in saying it's a fee imposed on the utility and not the property, if it is made to look exactly like a property tax, with minor tarting up. The entire "franchise fee" thing is an ugly fiction anyway, IT IS A TAX ON US, and at the public hearing Ramsey officials freely admitted that a utility pass-through was expected and intended by staff and council, in making initial proposals.

They were honest that way.

Even with the thing itself really being a dishonest back-door tax, and nothing else.

Government should strive for higher standards and conduct. Again, however, the legislature imposes levy limits to look good, then allows Authorities out the wazoo and franchise fees to permit lesser governmental units to blithely bypass levy limits.

The dishonesty in it all originates there, among our legislators. Posturing one way, enacting evasive largesse the other. It offends.

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