Franchise fee rate structure approved

Most residential customers would pay $7 per month under plan to improve FL’s street system


Clint Riese
News Editor

The rate structure is now known for the franchise fee that has been proposed to fund street improvements in Forest Lake. The fee, which is expected to soon gain final approval from the City Council, will raise approximately $700,000 a year to fund improvements on the 80 percent of the city’s roadway system that is not eligible for state aid through gasoline tax proceeds.

The council on Monday approved the fee structure that will be tacked on to the bills of local Xcel Energy and Connexus Energy customers. The monthly fee for residential electric customers of both companies will be $4. Small commercial and industrial customers will pay $2.50 per month, while the fee spikes to $75 per month for large commercial and industrial electric users.

Residential gas customers will see a monthly fee of $3. That number for commercial customers will be $7.50.

The franchise fee proposal, which is all but a certainty now that the 2013 budget has been set, stems from the recommendation of a city task force on streets.

The group found that it would take $1.7 million a year to maintain the city’s entire 100-mile roadway system even on a 100-year replacement cycle, which is far longer than a street’s traditional lifespan.

The city gets about $750,000 per year in state aid for improvements on eligible roads, said City Administrator Aaron Parrish. However, he added, the rest of the system has fallen well behind due to the current standard of assessing property owners for 70 percent of the cost for street reconstructions. Essentially, such total rebuild projects have ground to a halt.

“Clearly, we haven’t done reconstruct projects around here for a lot of reasons,” Parrish said. “It’s not a popular thing to do, to go around handing out $26,000 assessments. It’s not what people expect. It could put them in a position where, at that point in time, that assessment could negatively impact their ability to market their home. It’s more financially challenging than paying the proposed rate structure per month for gas and electric on a franchise fee basis.”

The city has been spending about $300,000 per year on mill and overlay projects which do not require assessments. That approach is more of a band-aid, though, and is also falling behind schedule.

“At the end of the day, we can’t mill and overlay forever,” Parrish said. “We have to position ourselves at some point to do reconstruction projects.”

The new franchise fee funds will allow the city to get back to total reconstructions, eventually; the next several years will be front-loaded with mill and overlay work in order to cover more miles.

When the reconstructions resume, affected property owners will be assessed at 20 percent. This is the minimum amount allowed without losing the ability to bond for such projects.

The franchise fee rate structure passed on a 4-1 vote, with Jackie McNamara in the minority.

Council member Mike Freer called the fee a “large tax increase,” but reluctantly supported it.

“We’re not doing maintenance on our roads like we should be and with the proposed city new complex and stuff like that, trying to mitigate as much liability on the property taxes is probably going to be a good thing for people,” he said.

Likewise, Susan Young favors the fee despite being lukewarm about it.

“From a policy point of view, this is not my preferred alternative, but right now I agree with the streets task force that this is the only way we will see the needed reconstruction and the needed improvement and the needed investment in our street infrastructure,” she said.

Mayor Chris Johnson expects the fee to save the city money in the long run as preventative maintenance prolongs the life of the street system.