At least one and perhaps more charter amendments to restrict how Ramsey uses franchise fees could be coming forward soon to the Ramsey City Council and perhaps Ramsey voters.
While the Ramsey City Charter Commission is not suggesting the council could not impose franchise fees, it believes “it must be limited to defraying increased municipal costs accruing as a result of utility operations and may not be used to raise general revenue.”
How much revenue this amounts to has not yet been determined, but what the council is contemplating is collecting about $1.7 million a year for up to the next five years through electric and natural gas franchise fees to pay for roads maintenance. If franchise fee ordinance is adopted, the council has discussed including safeguards such as a five-year sunset clause, capping the franchise fee amount, restricting its use to roads maintenance and not allowing special assessments to be charged if roads franchise fees are in place.
“I don’t want that (special assessment) language in (the charter) because I’m not saying this council, but there could be a council in the future that does both, uses franchise fees and use assessments,” Councilmember Jason Tossey said. “There’s nothing to stop that if the charter doesn’t limit that authority.”
City Clerk Jo Thieling said the council during a Dec. 10 workshop will discuss other potential charter amendment ideas that could be discussed with the charter commission, but its regular meeting later that evening would at least include a public hearing on the charter amendment’s proposed language.
If after the public hearing the council chooses to introduce the new charter language as part of a first reading, the second reading and final vote would take place Jan. 7, according to Thieling.
This vote would not be on whether to approve franchise fees for roads maintenance, however. That vote would have to come at a later date once these charter amendment issues are settled.
In order for any charter amendment to pass, the council must unanimously approve it. Otherwise, residents would vote on it.
Joint meeting Nov. 19
The council and charter commission met for three hours Nov. 19, but the meeting was focused more on bringing everyone up to speed on the current state of Ramsey’s roads, the need for consistent funding sources and the pros and cons of each of those.
With this being a workshop, no official action could be taken. Mayor Sarah Strommen said one of the council’s goals is to meet with its commissions more and it has been a long time since the council met with the charter commission.
“This isn’t just some ordinary issue,” said Joe Field, chairperson of the charter commission. “It’s not our function to regulate what the council does but to look in the long term for the residents of the city.”
Franchise fees garnered the most attention with it being the newest potential source of funding for maintaining Ramsey’s 174 miles of roads. Some of the pros were that it allows the city to collect revenue from tax-exempt properties, it could be a dedicated source of revenue, it would eliminate special assessments and it would be easier for residents and businesses to budget for.
Opponents have called franchise fees “a regressive tax” because it charges $8 a month to electric and natural gas utility customers regardless if they live in a $100,000 home or a $500,000 home or own a business. Property taxes account for this through taxable market values and tax rates for different properties. Proponents of franchise fees argue that everyone uses the roads though and should be charged the same.
A couple of residents at the Nov. 19 joint meeting also questioned what people would be charged if they have more than one electric or natural gas meter due to having multiple buildings on larger parcels.
Another downside of franchise fees, the council and charter commission said, is that it is not tax deductible unlike property taxes. But with landlords likely recouping the extra fees through rents, the renters would be able to get their money back through property tax rebates.
Assessments have plenty of downsides in the commission/council discussion because the amount could be well over $10,000 and thus difficult to prove that there is that much benefit to a property, which a city is legally required to do if someone opposes it. This creates inefficiencies in getting projects done when a neighborhood petitions against it.
However, this counter petition process means the city is more accountable because it has to show benefit, so this could be a positive depending on the point of view.
A pro argument for assessments that was brought up is that in order to use general obligation bonds to fund the larger roads projects, the city must have a policy in place stating it will assess at least 20 percent of project costs to benefiting property owners. The city’s policy is to assess 50 percent of overlay project costs, but it does not assess for sealcoating.
Near the end of the three-hour meeting, Councilmember John LeTourneau said he has not heard anything to say the council is not within the guidelines of the franchise fee state statute.
“All I’ve heard are ethical issues that are associated with the use of this tool and we’ve already had those conversations in regards to what we think are the ethics associated it,” LeTourneau said. “We don’t have a perfect solution. We have three choices that are all bad. What we’ve tried to do is use one of them or a combination of them so we can come to the place where we want to be as a community.”
Eric Hagen is at [email protected]