The Ramsey City Council needs more time to decide whether franchise fees tacked onto utility bills should help pay for maintenance of city streets.
“I know everyone assumed this was a done deal, far from it,” said Councilmember Randy Backous.
The council continued the public hearing and introduction of the proposed franchise fees ordinance to its Oct. 22 meeting, but the soonest it can vote is Nov. 12.
One issue the council will address is that the draft ordinance did not include any language saying that no special assessments would be charged while franchise fees are in place and there would be a five-year sunset clause on these fees.
The council has promised that would happen, but residents want it in writing and some suggested the city charter should be amended because it is a community’s constitution that can only be changed by the residents.
Almost all the 22 residents who spoke Tuesday evening at the city council public hearing are against charging $8 a month in franchise fees through both the electric and natural gas companies, which amounts to $192 a year for those serviced by both companies. They want the city to reconsider its priorities and fund road maintenance through the tax levy.
“We need to stop doing the extra things, the things that are nice and get back to the basics so we can afford what we have and not just keep looking at how are we going to get more money,” said Tonia Hugnagel.
The few who spoke in support at the Oct. 8 public hearing or Oct. 1 open house were glad the council was at least thinking of some new ideas to address long-term roads needs.
“I like the idea of having a little pool of money set aside every month to make sure our roads remain in good condition,” said Mary Olson.
Although City Engineer Bruce Westby said only about five of the 174 miles of city streets need to be reconstructed now, about half of the streets were constructed from the mid-1970s to the mid-1980s so the city’s concern is finding a stable funding mechanism now to deal with this issue in the future.
“This is a long-term issue with relatively minor immediate needs because most of our roads are in good shape, but there’s dramatic future impact if the city does not act now to responsibly plan for the maintenance and replacement of the road infrastructure,” said City Administrator Kurt Ulrich.
Olson and those who oppose the franchise fees did question why a person in a $100,000 home would pay the same flat fee as a person in a $400,000 home or a business owner. Cities such as Elk River and Forest Lake recently implemented franchise fees for roads and both have a tiered system.
“For some cities the fee is consumption based so the more kilowatts an hour a customer uses the higher the fee. Some cities charge a flat rate,” said Samantha Neral, director of communications and community relations for Connexus Energy which is based in Ramsey.
Neral said Anoka, Champlin, Circle Pines, Coon Rapids, Elk River, Forest Lake, Lexington and St. Cloud are the cities its serves that have franchise fees, but not necessarily for roads.
Coon Rapids collects over $3 million a year in franchise fees that goes to its general fund, according to the city of Coon Rapids’s budget document.
CenterPoint Energy serves over 260 communities and it pays franchise fees in 44 of them, according to Rebecca Virden, public relations manager.
Councilmember Jason Tossey distributed a flyer stating that franchise fees are a “regressive tax” because it shifts the burden of paying for roads to the poorest people.
The $100,000 and $400,000 homeowners would each pay $192 a year under the franchise fee proposal. If the $1.7 million was collected through the tax levy, the $100,000 homeowner would pay $63 and the $400,000 homeowner would pay $349, according to information Ulrich provided Tossey.
Former Councilmember Jeff Wise, owner of Wiser Choice Liquor, supports the franchise fee as long as it means the elimination of special assessments and reductions in the city budget rather than using franchise fees just as an additional revenue source. He believes renters and not just property owners should have to pay for maintenance because they all drive on the roads.
Ramsey resident Wayne Buchholz said he is concerned for senior citizens on fixed income. He visited the senior apartments at the corner of Highway 47 and County Road 5 and said “80 percent of those people in that apartment building don’t even drive. Some of these residents pay their rent with vouchers.”
156th Lane, just east of Highway 47, was sealcoated in front of Jim and Sharon Bailey’s home when they moved in 18 years ago. Sharon said the city has done some pothole patching, but cannot keep up.
“They said they’d sealcoat it every seven years, but they haven’t done it since,” Jim said. “I have no problem with $200 a year (in franchise fees) if that’s what it takes.”
Merlin Hunt and Roger Berfalk say they are frustrated that the government is just finding a new way to tax them.
Joe Field called it a “stealth tax,” but without the benefits of property taxes because franchise fees are not tax deductible.
Berfalk pays $20.25 every three months for stormwater, recycling and street lights fees. He has never had street lights in the 11 years he has lived in Ramsey, Berfalk said.
With a roads franchise fee added to his Connexus Energy and CenterPoint Energy bills, Berfalk would be paying $68.25 every three months in fees to the city of Ramsey, he said.
Berfalk thinks the city needs to do a better job of finding room in the budget for road maintenance and if necessary, increase the levy to pay for projects. He thinks the city has spent too much money on the COR area.
“It’s disingenuous to say roads have gone bad and now we have to do a fee to fix roads when we’ve spent all this money here,” Berfalk said as he pointed around himself during the Oct. 1 open house in the Ramsey Municipal Center.
Councilmember Mark Kuzma said he and the council are not responsible for what has happened in the past.
“We’re trying to find a solution to fix our roads,” he said.
Road franchise fee not a first
Elk River and Forest Lake faced similar financing questions that Ramsey must now address and both within the last year chose to limit special assessments in favor of franchise fees.
Prior to 2013 in Ramsey, 50 percent of total project costs for overlays were assessed to abutting property owners while sealcoat projects were assessed at a declining percentage from 50 percent in 2007 to 15 percent in 2012, according to Westby. No special assessments have been charged in Ramsey for road reconstruction.
Proposed 2013 Elk River special assessments were up to $8,000 for homeowners and $20,000 for the average business, according to an April 2013 article in the Star News. Elk River assessed 33 percent of the cost to replace existing streets and 100 percent of the cost for overlays. It also had recently levied $270,000 a year to pay the debt on street improvement bonds.
Starting in July, Elk River chose to get away from the special assessments and this tax levy. It anticipates about $1.4 million a year by charging $9 per month for residential properties, $29 to $41 per month for small commercial-industrial properties, $120 to $140 per month for general commercial-industrial properties, and $170 per month for the largest commercial-industrial users, according to Elk River City Engineer Justin Femrite.
Forest Lake used to rely heavily on special assessments with adjacent property owners having to cover 70 percent of a road reconstruction cost. Although Forest Lake now has roads franchise fees, it still charges benefiting property owners 20 percent of project costs through special assessments so the city is eligible to issue general obligation special assessment bonds, according to Forest Lake Finance Director Ellen Paulseth.
Forest Lake implemented franchise fees in May and expects to receive $1.7 million over a full calendar year. Residential electric fees will be $4 per month while the gas fee would be $3 per month. Through the electric bill, small commercial and industrial customers pay $2.50 per month while larger users pay $75 per month. The gas franchise fee for these businesses is $7.50 a month.
Paulseth said public feedback on the new franchise fee has been minimal and somewhat mixed.
“Most residents were fairly accepting after they understood the reasons for the decision. Most preferred this method to special assessments after seeing the analysis,” Paulseth said. “Special assessments are unpopular and are difficult to defend in court.”
Eric Hagen is at [email protected]