Hopkins Council Balks at Doubling Franchise Fees

Utility franchise fees are reviving a debate over who should pay for city services and improvements.

Franchise fees are payments Xcel Energy and Centerpoint Energy make as a condition for providing service to Hopkins customers. Like a sales tax, the companies pass the fees on to their customers.

Finance Director Christine Harkess suggested a new plan Tuesday that would double most of the fees—generating about $340,000 in additional money for the city’s capital improvement plan. Residential customers would pay $1 more per month, while the largest industrial users would pay $63 more per month.

Although franchise fees are not technically taxes, council members on Tuesday made it clear that the city has viewed them as another tax since their inception.

Still, the council balked at doubling the fees without a clear target for how much the city really needs to raise.

Councilwoman Cheryl Youakim said she is especially concerned about the impact on business customers—hundreds of which would see their fees more than double. Youakim noted that businesses are already being asked to bear more of the tax burden because of .

“Those people are going to get hit big time this year,” she said.

Yet franchise fees have advantages over property taxes, which account for more than half the city’s revenue. All utility customers must pay the fee, whereas many properties are exempt from property taxes—including government buildings, schools and religious and charitable institutions.

Regardless of what Hopkins does with franchise fees, Harkess said, the city needs more money for its capital improvement plan, which covers major facility and equipment expenses.

The only question is where that money comes from. If Hopkins doesn’t raise the money through franchise fees, it will have to borrow the money and spread the costs to residents who pay property tax—inevitably hitting businesses.

“It’s a balancing act,” Harkess said. “Where do you want to get your money from?”

That’s not a conclusion council members are willing to sign off on yet. The capital improvement plan may need more money, they acknowledged, but does it really need $340,000 more? On the heels of , they wanted a firm number for how much the capital improvement plan needs before setting a franchise fee.

Acting City Manager Jim Genellie promised to bring back a number at a later date.