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January 20, 2018

11/24/2017 4:59:00 PM
City Council reviews franchise fee during public hearing Nov. 14

North Branch council opened the public hearing last week on potentially enacting a franchise fee on energy customers (gas or electric) in the city and just one person spoke.  Derek Green’s concern was inflation of the fee-- he mainly wanted some kind of guarantee in the ordinance it couldn’t be increased at-will by elected officials in the future,  and get out-of-control.

The council consensus after its 40 minute discussion was to have staff develop a draft ordinance allowing for the monthly fee on a North Branch energy bill and council will review the details, possibly taking action, Tuesday, November 28.

City Administrator Renae Fry said the companies have informed her they need about 90 days to get a fee structure into their billing systems should the city direct them to do so.  There also must be revisions made to legal language in the franchise agreements to authorize the companies to collect, and redistribute the revenue back to the city.

At the public hearing North Branch officials explained they are investigating a flat fee.  It is “typical” that cities impose anywhere from $4 to $5 per month, staff reported. The “range” of already implemented fees is $2 to $8 monthly.

City Engineer Lee Gustafson explained the attractive thing about franchise fees is that they are dedicated to streets’ expenses and are predictable sources of funding.  

North Branch’s problem is that its property tax levy hasn’t addressed collecting adequate tax revenue to meet street needs.  

Gustafson said state aid -eligible streets only comprise about 20 percent of the city system.  When you can’t spend state aid funding on the other 80 percent of non-state aid miles, you need to find a source of money.  

There is also an option of a local sales tax. (The county has a half-percent sales tax in place but the County Board had authority to adopt this independently.)  A city referendum is needed at this time under MN law, council was told.  The soonest any sales tax revenue would come in is 2020.  Although, this may be considered yet, in addition to the franchise fee.  Council was told even with a mid-range franchise fee, the city will not collect what it estimates it could realistically spend on street maintenance needs.

Gustafson said the franchise fee could still leave North Branch $350,000 or more shy of estimated annual expenses that are not being met.

He explained that 18 miles of city streets have not ever been overlaid.  Not doing maintenance means the streets breakdown and costs to rebuild are “five to eight times” what North Branch might spend to do regular bituminous maintenance.
Public Works Director Shawn Williams added that when the city of Branch (a dissolved independent entity that encircled the old town area) and North Branch merged in 1994;  overnight it became a city with 36 square miles...and property tax levies never have been sufficient to support an urban street system.

Williams has “creatively” shifted some gravel budget money into the highest priority street needs over the years-- but North Branch “kicked the can down the road” as council members pointed out, far too long.

Council member Jim Swenson remarked that he can’t alter what previous councils failed to do,  but he’s prepared to begin to fix  almost 10 years of do-nothing leadership now.

Council member Kelly Neider added there’s a “sense of urgency” to this problem that can’t be ignored.

Mayor Kirsten Hagen Kennedy noted that some residents ask her why  streetwork can’t just be fully assessed to benefiting properties on the project streets.

Gustafson explained that assessments are never 100 percent of a project cost,  and expenses still are spread over all taxpayers.  Plus, there’s great cost to borrowing and servicing debt,  using assessment payments.  Even the 429 assessment process costs money.  

With a dedicated source of revenue and an account the city can build-on,  some of the assessed projects can be financed more easily or basic maintenance projects could avoid assessment.

City Administrator Fry said council will review the franchise fee ordinance November 28,  but it won’t be the FINAL version, and if between now and then, concerns arise, the wording can continue to be worked on.

In other matters:  the city has an upcoming Water & Light Commission seat expiring,  as Matt Falk’s term ends. Anyone interested in applying can contact the city.  The members meet at the utility offices in North Branch the third Tuesday of each month at 3:30 p.m. Terms are three years.

The Parks Trails and Open Space advisory committee has two vacancies. It meets at 7 p.m. the first Monday of each month. This is a three year term.

The EDA has one seat that citizens are encouraged to apply for. The Economic Development Authority meets at 3:30 p.m. at city hall the first Thursdays.

Please have applications submitted by November 30 for consideration by council.


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