FRANCHISE FEES: How City Plans To Pay Back Money

The Des Moines City Council met Monday night to discuss how to pay the more than $40 million in franchise fee refunds it owes to Des Moines residents.

A judge ruled the fee charged on utility between 2004 and 2009 was an illegal tax, Monday night the council looked at several options to pay back the money.

“What`s it’s going to require is that we deposit $41 million with the courts in the very near future,” says Des Moines City Manager Rick Clark.

Clark laid out the city’s options to pay back the franchise fee refund.

“We don`t have $41 million lying around anywhere so tonight the council is considering at this hearing the issuance of $41 million of general obligation bonds,” says Clark.

Two options were presented to the council to pay back those bonds.

The first would increase property taxes by 41 cents per $1,000 in taxable value for the next 20 years.

The second would raise the current franchise fee 2.5% for the next 7 years.  That option requires voter approval.

City Council Member Brian Meyer doesn’t like either option.

“I`m consistent on not supporting anything that will be longer than a few years to pay it back,” says Meyer.

Meyer wasn’t on the City Council when the council first voted on franchise fees and says he will continue to stay out of the issue.

Under the second option, the $5 franchise fee on a $100 MidAmerican Energy bill would jump to $7.50.

That works out to an increase of $30 a year or $210 for the entire 7-year period.

City council member Bob Mahaffey says because roughly 40-percent of Des Moines property is tax exempt, he prefers raising the franchise fee.

“They will also be paying into the franchise fee for the usage of whatever utilities they use, so it will reduce the amount that the residents would have to pay,” says Mahaffey.

The city council voted Monday 6 to 1 to move forward with issuing the bonds.

They don’t have to decide which option they will choose to pay back the bonds until they submit the 2015 fiscal budget in March of 2014.


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