City one step closer to doubling franchise fees

NOT INSIGNIFICANT

For large utility users, the fee is not insignificant. Businesses are already being asked to reduce costs, improve efficiency, manage inflation, and compete for corporate investment.”

Emily Benjamin, CEO Lee County Economic Development Group

FORT MADISON – A heavy discussion on franchise fees almost prompted a failed vote of the Fort Madison City Council on its first effort out of the gate.
The city wants to double the amount being collected from Alliant Energy and MidAmerican Gas from 1.5% to 3%. The city has had a franchise fee on the books for decades, but had it set at 0%. In 2021, the city approved collecting the tax on the utility consumption.
Liegois said the increase will generate an additional $270,000 in funds from Alliant and $61,800 from Mid-American. The total funds generated by the franchise taxes is now expected to be $663,600 from both utilities. When the city implemented the 1.5% franchisee fee, a 1% sales tax went away.
The council voted 4-1 to approve the first reading of the 3% agreements after approving the revenue purpose statements that guide the usage of the funds, unanimously. Councilors Rusty Andrews and Dustin Yager were absent.
City Councilor Nicole Merschman voted against the agreement because she said the burden of the natural gas tax falls heavier on residents with many larger consumers in the city getting relief because they don’t buy their gas directly from MidAmerican.
Council Rick Thele, an employee with MidAmerican, spelled out how some businesses only pay a transport fee for MidAmerican moving the gas to their facility, while the business works directly with larger distributors for supply.
City Manager Laura Liegois said she did hear from one industry about the increase in fees.
“I received, through Tim Gobble at Economic Development, a concern from an industry. I did request to see their billing so I could explain what this would do or impact. I did not get the opportunity to do so, especially with the natural gas piece.” she said.
Emily Benjamin, President and CEO of Lee County Economic Development Group, told the council LCEDG did send an email out to industries in city limits to get feedback regarding the city’s proposal. She said she recognized the position the city was in and providing services is a vital city service.
“At the same time, we would urge the city council to carefully consider the unintended consequences of increasing utility costs for local employers,” she said.
“For large utility users, the fee is not insignificant. Business are already being asked to reduce costs, improve efficiency, manage inflation, and compete for corporate investment. Added costs must be offset through reduced spending. That results in narrow traffic scopes, results in delayed investment, and results in few hiring opportunities or other operational decisions. So that really matters to Fort Madison.”
Councilman Matt Emmett said he was struggling with the franchise fee increase, but with the city council approving a budget that included the franchise fee increase, he didn’t see how they could now vote against the franchise fee.
Fort Madison Chamber of Commerce Director Savanna Collier said some of the feedback she received include membership with opinions varying.
“But the overall theme was concern about the growing costs businesses and residents alike are being asked to absorb,” she said.
“What we heard was no opposition to public safety, infrastructure or city services. Business owners understand those services are essential and maintaining those does require funding. What I heard was concern over the stacking impact that we have going on currently.”
She said businesses are facing higher costs in all aspects and many are operating on tight margins and making difficult decisions. She said some mentioned ongoing bridge closures and the impact on customer foot traffic.
She said one business owner expressed support for the franchise fee as a way to broadly distribute costs as it relates to people with rental properties so the burden isn’t always on the property owners.
The increases still require two more formal readings and votes by the council.
The council also voted 3-2 in support of a measure to set fire inspection fees. Fort Madison Mayor Melinda Blind said the motion passed, however upon further review, the three votes from a council of seven was not a majority and the resolution will be brought back up at a future meeting after being technically defeated Tuesday.
Emmett pushed Fire Chief Chad Hannum for a possible alternative that would allow business owners with approved independent inspections to obtain a waiver of the fees if they provide the inspection report to the city.
Hannum said he was unaware of that protocol being in effect anywhere else and said it’s the fire department that has to go back in when corrections are needed and he would prefer that stay in the city’s jurisdiction.
In unrelated action, the council voted 5-0 to approve a new 45-mile limit on where city police officers can live. That expands the limitation to Illinois and Missouri to attract additional candidates.