Industry leaders push back on franchise tax


FORT MADISON – Despite not having a franchise tax vote on the agenda as some thought may happen Tuesday night, three leaders from Fort Madison industries spoke out against the idea during public comment.

Bob Huffman, president of the Fort Madison Economic Development Corp. and vice president of Huffman Welding & Machine told the council a franchise tax would be detrimental to the FMEDC goals and to industry in general.

He said industry leaders have met with city officials recently and in the past to look at what impact a franchise tax would have on the economic landscape of Fort Madison.

“We appreciate the open dialogue so far and we hope that continues and if this process does continue, we’d like to have a voice in that,” Huffman said.

He said the FMEDC’s vision is to be the driving force behind the growth of jobs, new residents and enhanced quality of life in Fort Madison.

“We have to be cognizant of the concerns of when the city or other outside sources consider funding mechanisms that could potentially harm their global competitiveness and/or reduce their internal corporate advantage for future growth,” Huffman said reading from a prepared statement.

“The city’s proposed franchise fee on both natural and electric is doing just that for many of our industries which are employment centers of our community.”

Huffman said 50% or more of the proposed revenue increases for the city would be shouldered by just five industry partners.

Huffman said he’d like to see a larger sweep of city budget to identify additional cost saving measures vs. the ongoing discussion of cutting services.

Huffman said the concerns focus on keeping some of the industries competitive within their own companies.

“What is it going to cost us if we lose another company. And what would it cost us if we missed out on the next growth that puts 100 jobs here. I know that’s not all on the franchise fee, but it’s a part of it.”

Bryan Langerud, plant manager at Con Agra said with the recent acquisition by ConAgra, now the Fort Madison facility is no longer the only canning facility within the company.

Langerud said in reality, Fort Madison, despite adding new lines and more than 100 additional employees, is one of the smaller canning facilities in the ConAgra brand.

Langerud said at 1.5% the tax would cost ConAgra $60,000 annually. He said at 5% when the new line expansion is figured in that number climbs to $200,000.

“That’s pretty significant. And it’s tied to energy obviously, and the last electric increase we took was 13% – a $2 million spend. So these things are starting to compound themselves and put us in a challenging position.”

Emily Benjamin, with Climax Molybdenum, said the move is heavily disproportionate to industries and their ability to stay competitive.

She said Climax is committed to Fort Madison and was encouraged by discussions that are underway between the city and industry.

“I think its important to mention that COVID has required some uncomfortable changes for all the industries in the area,” she said.

“We’ve all heard from our corporate offices that cost containment measures are necessary and capital projects planned for the next five years will need to be postponed until some level of economic recovery is realized.”

City Manager David Varley was not at Tuesday’s meeting but said in a budget recap last month that overall the city’s expenses, which are 81% payroll, exceed revenues by about $400,000.

Mayor Matt Mohrfeld has advocated for the tax, but wants it phased in with a smaller hit up front and then a review to see if the rate needs increased, decreased or reset at 0. Varley said a 3% tax, would help build a minimum working capital and close city funding gaps for about five years.

He said bonding for the remaining Hwy. 61 rehabilitation project would also help put the city on better financial footing.

Five of the seven council members at the last city council meeting favored the franchise fee in some form, but arrived at no consensus on a specific rate or structure.

The council did unanimously approve an agreement with the law firm Ahlers Cooney out of Des Moines to represent the city in any negotiations with the utilities involved in collecting the franchise tax.

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