The City of Wabasha is working with Xcel Energy to potentially implement a Franchise Fee on gas and electric customers. The City Council will make a final decision at its January 4, 2022 Council Meeting.
Xcel Energy has more than 357 franchise agreements in Minnesota. They are a common way for a city to raise revenue. Funds raised through the implementation of a Franchise Fee will go directly to the City of Wabasha Capital Improvement Plan (CIP). The CIP is used to fund the purchase of critical Capital Equipment for the City of Wabasha including squad cars, ambulances, fire trucks, and snowplows. It also helps fix streets and sidewalks as seen in these pictures below. Want to know more about what the City of Wabasha CIP funds, CLICK HERE for a slideshow presentation.
What does the franchise fee mean for residents?
Utility companies (Excel Energy) have the right to pass franchise fees on to their customers. The utility companies collect the franchise fees and remit them to the City. The franchise fee is proposed at $1 per month, per account, on a residential gas bill and $2 fee per month, per account, on residential electric bills. The means that residential utility customers would see total fees at $3 per month. Commercial rates will vary based on the account class but are anticipated to be a total of $8 per month (for gas and electrical) for smaller businesses and $20 per month (for gas and electric, $10 each) for larger businesses.
Why is the City discussing a Franchise Fee?
The proposed fees will generate approximately $76,000 in revenue annually that will help the City cover unfunded costs in its Capital Improvement Budget related to repairing city streets, sidewalks, equipment replacement for public safety, sidewalks, parks, etc. On average, the City needs at least $150,000 per year for the next 5 years to cover basic capital costs not paid for from taxes, special assessments, and other funding sources. Franchise fees will help offset the costs without increasing property taxes.
Why are franchise fees a better option than increasing the tax levy?
Utility franchise fees would apply to all utility customers in the city regardless of whether they pay property taxes. This includes non-profit organizations, schools, churches, and government customers. Thus, the fees are distributed more equally than property taxes. For example, all those who use streets would help pay for them.
Why not stop funding Capital Improvement Requests?
If streets aren’t fixed, due to lack of financial resources, this sets the City up for a more expensive bill in the future, along with damage to vehicles due to potholes. Equipment replacement requests ensure that our police officers, fire fighters, EMS can respond to emergencies in vehicles that work, and public works can plow our streets or sweep them with reliable equipment. Actively maintaining streets and parks assures residents and visitors alike that the City is well cared for and well managed.
What other cities nearby have franchise fees? Lake City, Winona, and Goodview, MN also have franchise fees.
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