Franchise fees

Faribault City Engineer Mark DuChene, center, reviews the pros and cons of doing away with street assessments and instead using franchise fees which are paid monthly in gas and electric bills and passed on to the city during Tuesday’s council meeting. Also pictured are Councilors Royal Ross and Tom Spooner. (Suzanne Rook/southernminn.com)

2021 could be the end of the road for street improvement assessments in Faribault.

On Monday, a majority of City Council agreed that replacing assessments with franchise fees is the way to go. Currently, property owners are assessed for a portion of road projects that impact their property. Those assessments, which can run thousands of dollars, are often a big hit to property owners, City Engineer Mark DuChene told the council.

By increasing franchise fees, the city could lessen that sting as well as increase the number of properties paying for the work. Tax-exempt properties aren’t assessed for street improvements, but they are charged franchise fees. And in a city that’s the county seat and home to a state prison and the Minnesota State Academies, that could make a noticeable difference.

In Faribault, franchise fees are included as part of the utility customer’s monthly bill. That money, collected as a fee that allows the utility to operate within city rights of way, is then passed to the city.

While Councilors Tom Spooner, Peter van Sluis, Jon Wood and Royal Ross liked the idea, Janna Viscomi felt franchise fees were inherently unfair. Mayor Kevin Voracek and Councilor Sara Caron were absent.

Customers are charged per meter, with commercial meters assessed a higher fee. In a building with tenants who have their own meters like Viscomi’s, the city would receive more in franchise fees than from a neighboring building with fewer meters.

And while that was true, overall, DuChene and city Finance Director Jeanne Day said, franchise fees are the most fair, and the easiest on pocketbooks.

The city of Northfield moved away from street assessments to franchise fees late last year, citing similar reasoning as DuChene.

An analysis by the city — $5 more for residents, $10 more for commercial customers — estimates revenue from franchise fees would increase by about $1.5 million annually if the council OKs the change. On average, assessments bring in about that same amount each year.

The change also ensures that some residents aren’t hit hard by assessments while others miss them all together.

Both Spooner and van Sluis said that within a couple years of buying their homes the were shocked to see large assessments for street improvements, meaning the former homeowner was fortunate enough to have moved before the bill came. The converse is also true, with some residents paying assessments — which must be paid in full when a property is sold — and a new property owner not feeling the pinch.

But what about those who are now paying street assessments?

DuChene said those property owners will be able to apply to have their assessments refunded annually. If the council OK’s the increase in franchise fees and ends street assessments as anticipated, refunds would begin in late 2022.

Reach Regional Managing Editor Suzanne Rook at 507-333-3134. ©Copyright 2021 APG Media of Southern Minnesota. All rights reserved.

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