By PETER HUSSMANN
It will be interesting to see how cities across Iowa use the gift Gov. Chet Culver plopped in their laps at the end of the legislative session.
A new state law allows cities to collect a franchise fee of up to 5 percent on electric and natural gas utility services.
While utility customers may not like it, especially due to the recent rate hikes Alliant and Black Hills utility users have seen on their electric and natural gas bills, the law could provide cities with a new revenue stream that does not involve property taxes.
Newton City Administrator Tom Wardlow said city officials have not even had discussions about discussing it.
"More analysis of the new law is needed and we have not had a chance yet to do so," he said.
One such analysis would be how implementing a franchise fee would impact a city's local option sales tax collections. Under the law, cities are not allowed to collect the one-cent local option sales taxes on natural gas and electric services if a franchise fee is in place.The City of Newton collected more than $1 million in local option sales taxes last year.
Prior to the governor's's action, cities were allowed to collect franchise fees but only up to the amount it cost to regulate the utility. The City of Des Moines faces the possibility of returning millions to local residents after a court ruling found the city was collecting fees in excess of the cost of regulation. The new law eliminates that provision.
Before implementing a franchise fee, cities will be required to prepare a "revenue purpose statement" that specifies how the fees will be used. The legislation spells out that the money can be used for a variety of purposes, including property tax relief, public safety, economic development, facility and infrastructure repair and even for such things as energy conservation measures for low-income home owners, property tax abatements and building permit fee abatements.
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