March 19, 2024

Potential franchise fees hot topic for city council

Concerned citizens and businesses turned out to voice their opinions on a proposed franchise fee for electric and natural gas utilities at Monday’s Newton City Council meeting.

A lengthy discussion was held by the council about all options that were considered to pay for infrastructure improvements, as well as potential caps for larger manufacturing businesses that are heavier users of local utilities.

“We absolutely are in support of having Newton be an attractive community with good roads and good infrastructure. We are however extremely concerned about how the funds to accomplish that would be raised,” said Dick Davidson, president of Thombert Inc. “This calender year, Thombert will use just over $300,000 in gas and electric utilities. We use that power to convert raw materials into our finished product, so it is a crucial part of our manufacturing process. Utilities as such are a major cost component in our overall product.”

Davidson said a utility tax increase will make Newton a less competitive place to manufacture products.

“I think because of the fact that we have a number of manufactures in this community that use huge amounts of electric and gas utility, that this kind of a tax places a very unfair burden on manufacturing businesses,” Davidson said. “ It makes Newton less friendly to manufacturing businesses.”

One option the council is exploring is capping the amount that one business would pay.

Keith Sherman, an Alliant Energy spokesperson, said Alliant would collect the fees, but the city is in charge of refunding any cap that is put in place.

“You have to be very careful when looking at customer classes .... and you don’t want to be in a position where you refund to a particular customer and then you have a competitor in that business. If they find out they aren’t getting the same treatment,” Sherman said.

He said Dubuque put a cap in place, but eventually got sued by citizens that were not aware of the opportunity to save on the fee.

“It’s something that you have to approach carefully,” Sherman said.

Bryan Friedman, director of finance and development for the city, explained how the city could implement the cap and the risks that are associated with it. The city would look at the companies utility bills for the entire year and determine when it has reached the threshold. They tricky part, he said, would be defining the rules as to who would be eligible. The process would have to be implemented in a way that would withstand any legal challenges and would be fair and equitable to the community.

“Mr. Davidson rightly said that there are a lot of manufacturers in Newton and they have energy intensive processes, but they are not all the same,” Friedman said. “Is a small company, that this would be a bigger hit to, but relative numbers of their payments would be small (be eligible), would be smaller than a giant company that would be able to absorb that increase much more easily given their total revenues. Trying to define that is a tricky process.”

Citizens also expressed concern about the addition of fees to their utilities.

“Is this going to make people stop and have seconds thoughts of moving into Newton versus Kellogg, Colfax some of the other places,” Dixie Cassidy said. “Also we have an awful lot of senior citizens. Better yet, how about putting it up to the citizens to vote on. I have three elderly ladies just within a block of me in their nineties and they said, there is no sense of coming to the city council because you guys have already made up your mind of how you are going to spend our money.”

Sherman said his interaction with the city has been very thorough. He said that he has had several emails and phone calls and believes the city is not going into the franchise fee blindly.

“Some communities recognize that with the changes going on in Des Moines and in their long range vision to attract business sometimes they need to do thing with infrastructure and they have no other recourse, they are limited by what they can to do raise revenue,” Sherman said.

If citizens would like to challenge the council’s ruling, they have the option of submitting a petition to call for a referendum. The petition would need less than 40 signatures and there is a 20 day period in which to submit it. The council would then decide if to move forward with the referendum or not pursue the franchise fee process any further.

“The city would be obligated for the cost of the referendum. It would be somewhere between $5,000 and $11,000, somewhere in that range,” Knabel said.

Council Member Jeff Price said that he often gets questioned on why the council cannot find the needed money in the city’s budget.

“When you talk about that type of scope, if you’re going to fix that small of area and it costs of $300,000 or $400,000 I think that is one of the answers I keep coming to, you are going to end up depleting pretty much a ton of (funds),” Price said.

Two recent street projects, one in front of DMACC on North Second Avenue West and the other in front of Skiff on North Fourth Avenue East, cost between $700,000 and $800,000 to complete. Knabel explained that going into the general fund to pay for the infrastructure would mean giving up other items in the budget.

“The large amounts, as you indicated, it’s not like it’s one or two streets that are out there that need attention. It is across the community and the longer they go unattended, that cost will go up and continue to rise because of just a lack of maintenance we have seen,” Knabel said.

He explained how the franchise fee is the least costly option to residents that was explored. The other potential option was a property tax through a bond issue that would include an debt service levy because the emergency levy and capital levy alone would not cover the cost. With the bond issue, there would be no flexibility with how the money is spent, it would be 100 percent to what it was designated. The franchise fee has the potential to go towards a single cause, but could be reallocated in case of emergency. Mayor Michael Hansen wrapped up the discussion with his view and experience he has had since being elected to the council in 2002.

“I’ve been sitting in this council chamber since 2002. The can has continually been kicked down the road regarding our infrastructure needs. Council has made a decision that we can’t do that any longer, we have to begin to address that. I’m glad that we’ve had that discussion here concerning the options you have considered,” Hansen said. “The issue at hand is, that these streets have to be addressed. They are a must. This is a difficult thing, I get that. Council has very, very few options available to them in order to address that.”

“Folks we have 25-30 years worth of work to do in the streets as far as funding is concerned. The fact is that we can no longer kick the can down the road on our infrastructure needs.”

Contact Staff Writer Jamee A. Pierson at (641) 792-3121 ext. 6534 or jpierson@newtondailynews.com.