Rep. Bob Vogel, R-Elko New Market, has authored a bill that would provide taxpayers with greater transparency when local municipalities are considering or renewing franchise fees for utility services.
A report from the nonpartisan Minnesota Office of the State Auditor indicates 357 cities raised a combined $136.9 million in franchise fees during 2014. That is up from 23 cities collecting $13.7 million when this practice began in 1975. Minneapolis and St. Paul together collected $59.6 million in franchise fees in 2014.
That money is paid by consumers and employers through surcharges applied to their utility bills.
“Often, citizens are unaware this is taking place because it appears to be a fee charged by the utility, opposed to what is in reality a tax being collected by the utility for the city,” Vogel said. “The goal of the bill is not to restrict using the fee if that is what people want, rather it is to bring greater transparency to the process so taxpayers can make a proactive decision if this is the best way to fund their local government.
“People need to have a say in the matter of how their taxes are being collected, especially when it shows up on their utility bill and is ultimately redirected to local governments. This raises utility costs and effectively serves as a hidden tax,” Vogel continued.
Vogel’s bill (H.F. 3470) says taxpayers must be notified of proposed or renewing franchise fees to be collected there must be a public hearing, and, if 5 percent of voters object, it spurs a referendum for the following November election.
“There is a significant lack of transparency that is growing,” Vogel said. “If taxpayers and cities agree to raise local taxes, that is their decision, but it also needs to be something they should be deciding together with full information about all the taxes and fees involved. The problem that now exists with franchise fees is they often are used as an alternative for cities to increase their levies without citizen approval. This bill gives the people the information they need so they are fully aware of what is happening.”