Isom

An educational — and sometimes contentious — workshop enlightened the city council to the merits and drawbacks of franchise fees on Thursday afternoon.

The city has weighed several options to heal, or at least soothe the budget in 2022 from cuts to fees. Susan Parker, a consultant with Sparker Solutions, led Thursday’s workshop with the aim of helping the council decide if franchise fees are an appropriate tool for Marshalltown.

A franchise fee, in the way a city like Marshalltown would use it, would add a charge to the bills of utility customers. The utility providers, in this case Alliant Energy and Consumers Energy, collect the fees and pay them to the city, and the revenue is used for a specific, qualifying purpose, which the city must declare in a revenue statement.

If Marshalltown were to adopt franchise fees, they would apply to all gas and electric customers within city limits. Unlike the Local Option Sales Tax, churches and nonprofits would not be exempt from paying the fee. The only customer not required to pay the fee would be the City of Marshalltown.

Franchise fees can not be applied to utilities owned or run by the city, according to Parker. The City of Ames is an example of a city which operates a utility and cannot enact a franchise fee on it.

Finance Director Diana Steiner explained the franchise fee would effectively replace the 1-percent local option sales tax on utilities as the city cannot use both. This also means a 1-percent franchise fee on utilities would not have much of an impact on the budget, so it is likely the city would charge 2-percent or more if it does adopt the fee.

According to Parker, 209 communities in Iowa have some kind of franchise fee in place.

After a brief overview of what a franchise fee is and how it works, Parker asked each council member to share what they think is positive and negative about a franchise fee.

“It moves the needle in a little better direction than some of the capital funding we have,” councilman Gabe Isom said.

Fellow councilor Dex Walker pointed to the long-term flexibility it could help to provide.

“A positive is it would give us a little bit of strength around our planning efforts,” he said.

The councilors agreed the biggest con of the fee is how it would impact residents.

“Inflation is real, and it causes all families to think pretty hard about things like this,” Walker added.

Department needs

During the next portion of the workshop, department heads shared the many needs a franchise fee could help them to fund in the future. Parks and Recreation Director Geoff Hubbard spoke of maintenance to the aquatic center and upkeep to city parks. Fire Chief David Rierson shared the challenges of operating his department under a tight budget, and Police Chief Mike Tupper said his force needs funds for training, technology and staff.

Thomas

The meeting became more tense when Public Works Director Heather Thomas shared the vast number of needs in infrastructure and maintenance of public facilities ranging from a collapsed septic tank lid at the airport to failing urinal sensors at the Police and Fire Building.

When it came to the Police and Fire Building, city administrator Jessica Kinser noted the project was a first of its kind for the city.

“From the staff perspective — we were not going to be doing so much repairs and maintenance on what was effectively a brand new building compared to our other facilities so quickly,” she said.

Isom contended that the city was ‘ignorant’ in setting the budget for the project when it was being developed. Kinser said ignorance over the costs of annual repairs would be an accurate description.

Thomas said she was shocked at the cost of some components to the building as well, such as $700 for urinal sensors.

“Your predecessor, we paid you guys to know. The taxpayers pay the department heads to know their strengths — weaknesses,” Councilor Gary Thompson said.

Isom observed that the deficit may be larger than what appears on paper because of where the city has fallen behind in repairs and maintenance. Kinser said the public works department was also dealing with a personnel deficit after the passing of longtime public facilities superintendent David Daters in February. His position was recently filled, according to Thomas.

“We can present you all the information in the world, but if there’s no money for it, we still have the same problem,” Kinser said.

Isom grew frustrated as he responded.

“Jessica, I hear you but what you just said is irrelevant,” Isom responded. “These aren’t new issues. These aren’t new maintenance things to a 120 year old building. They’re maybe new from an awareness perspective at least to the council, but not to staff.”

Kinser

Kinser began to respond as Isom spoke over her, telling her there was no need for a rebuttal. She continued to say these topics come up in the general fund budget discussions at the beginning of the year.

“We’re trying to do everything we can to keep the personnel we have. We’re at a point where that doesn’t work, which is why we’re having this work session today,” she said. “We’re at the point where we can’t fund what we need to do.”

Isom asked if Kinser’s expectation is for the council to go over the budget line by line and critique what staff has put forth. As Kinser began to respond, Isom again spoke over her.

“That’s what you’re saying,” he said. “That’s ridiculous.”

The council decides

At the conclusion of the meeting, Parker asked each councilor to state how they would like to move forward. They were asked to give franchise fees the ‘green light’ — meaning they are in favor right now — a ‘yellow light,’ meaning they need to gather more information, or a ‘red light,’ meaning they do not want to consider it further.

After some discussion, each councilor and Mayor Joel Greer gave their support to considering franchise fees further. Parker counted five green lights initially, though the final decision was to form a subcommittee.

“We’re at a point where we are absolutely at a growth mode,” Greer said. “This is not the time to put the brakes on.”

Greer will choose the members of the subcommittee. Per the council’s direction, it will research the needs of the city, prepare a revenue statement and bring back a recommendation for the scale of the fee. A city is allowed a fee of up to five percent of a franchisee’s gross revenue in Iowa.

There are two ways a franchise fee can be adopted. The city can hold a special election and put the franchise fee on the ballot. The other option is for the citizens to petition for a reverse referendum, which would also put the franchise fee to a vote.

The next available special election date is March 7, 2023. The county auditor would need a petition by Jan. 20, so the city would need to receive it by Jan. 13.

“The public doesn’t understand the financial crisis of the city. We haven’t done a good job of saying we can’t do everything you want,” Thompson said. “We all want to live in Emerald City, but like Al (Hoop) says, we have to fix the yellow brick road first.”