Franchise Fees

The Northfield City Council is considering utility franchise fees as an alternative revenue source from special property tax assessments primarily for street improvement projects, and secondarily for ancillary improvements (i.e. trail gaps, sidewalk gaps and climate actions and initiatives as outlined in the strategic plan).

Northfield maintains nearly 78 miles of paved city streets, and 84 miles of trails and sidewalks.

The city spends $3.5 million annually to maintain city streets.

Home and business owners are assessed between 25 to 50% for street improvement projects. Replacing streets typically occurs every 40 to 50 years. The city uses general property taxes and bonds to pay for the remaining costs of street replacements.

View ordinances under consideration

Tentative timeline public meetings

October 20 - Review ordinance, call for public hearing

November 10 - Public hearing, first reading of ordinance

November 17 - Second reading of ordinance

November 18 - If approved, notice to Xcel (90-day implementation)

March 2021 - If approved, revenue commencement

View City Council information

Feedback

Attend in person via electronic means

Because the meeting is being held online, prior to the start of the Council meeting on November 10, you may call in or connect via computer with the following GoToMeeting information to provide your oral comments, input, or testimony:

If you desire to make oral comments to the City Council during the public hearing on November 10, 2020, you are requested, but are not required, to contact Finance Director Brenda Angelstad via e-mail and copy City Clerk Deb Little no later than 4:00 p.m. on November 10 to notify the City of the same so that arrangements can be made for your participation at the City Council public hearing.

Request to make oral comments with Brenda Angelstad and Deb Little

If you register as provided above, you will be called on by the presiding officer when it is your turn to speak; when called upon please unmute your device, turn on your camera, if applicable, and state your name and address before making your comments. If you do not register, the presiding officer will call for public comment at which time you may make your public comments; please unmute your device, turn on your camera, if applicable) and state your name and address before making your comments. During the hearing, please mute your phone or device and turn off your camera at all times until the presiding officer calls on you.

eComment

Residents can comment on any agenda items until 4:00 p.m. on the day of the meeting by using the eComment (electronic comment) system. Once the City Council agenda is published, the eComment link will be active. Residents can review agenda item details, indicate their position on an item and leave feedback by clicking on the eComment tab on the City Council meetings page:

Review City Council meeting information and leave a comment

Email

Send an email no later than 4:00 p.m. the day of the meeting to the Finance Director Brenda Angelstad and copy City Clerk Deb Little noting public hearing comment in the subject line and type your comment in the body of the email or attach a document if necessary.

Email Brenda Angelstad and Deb Little

Letter

Send a letter containing your input to:

  1. City Clerk Deb Little, City of Northfield, 801 Washington Str., Northfield, MN 55057
  2. Letters must be received prior to the meeting.

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In the next few months, materials regarding franchise fees will be included in the City Council packets. Also, information regarding updated information, decisions or changes to franchise fees may be included in general news. You may find it useful to be signed up for these lists:

  • City Council packets
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What is a franchise fee?

Many cities in Minnesota have a franchise agreement with each utility company (gas, electric) for the use of publicly-owned right-of-way for their business purpose. The right-of-way is the public property located adjacent to roadways for utilities, construction access, and snow storage. By law (Minnesota Statute 216B.36), cities may charge utility companies a fee to manage the use of the publicly-owned right-of-way to deliver service.

The City determines the amount of franchise fees as established by an ordinance that is mutually agreed upon by the City and the utility company. In Northfield that utility company is Xcel Energy. Xcel Energy currently only allows a flat rate for residential and commercial customers, based on their defined customer categories.

Utility companies have the right to pass franchise fees on to their customers. Utility customers will see a line item on their gas and electric bills for a “city fee.” The utility companies collect this fee and remits all of the payment directly to the City.

What is a street assessment?

Home and business owners are assessed for street improvement projects and owners typically pay between 25% to 50% of the project costs based on the benefit of the improvement to property. The type of street improvement can vary, from a Mill and Overlay, to Reclamation, to Reconstruction. The expected life of a street is between 40 and 50 years. Typically, you will have one type of street improvement on your street every 20 years.

On average, residential property owners have paid an average of $6,800 for their street assessment.

Street assessments are typically based on front footage. An appraiser determines the special assessment linear foot rate. This rate is then applied to the front footage of each property adjacent to the street maintenance project.

What are the benefits of franchise fees over a street assessment?

  • Smaller monthly fees instead of one large assessment.
  • Less time-consuming and substantially less costly overall for the city (approximately $75,000 less expensive per year).
  • Keeps maintenance and reconstruction on a proactive and timely schedule.
  • More equitable to people who move into, out of, or within the city.

What are the benefits of franchise fees over increasing property taxes?

  • New construction would contribute immediately, which would eliminate the one to two-year lag for the City to receive property taxes for property owners receiving municipal services
  • A wider base than property taxes; property taxes exempt renters, non-profits, schools, and other entities that use the public infrastructure pays franchise fees.

How will the franchise fee be used?

The proposal before the City Council is to dedicate franchise fees primarily to street maintenance, which includes mill and overlays, full depth reclamations, and reconstructions.

Secondary use of funds (approximately 8% of the total collected) will assist with implementation of actions in the Northfield Climate Action Plan which may include other transportation infrastructure such as trail and sidewalk gaps.

Construction projects

Climate Action Plan

Why will some of this fee be used toward implementing the city’s Climate Action Plan?

Many city services are funded through collection of fees from the community such as water, sewer, and garbage. At this time, there is no dedicated fee to fund the Climate Action Plan.

How will I benefit from the City implementing the Climate Action Plan?

Carrying out the Climate Action Plan will be beneficial to the City and residents in many ways such as:

  • Cleaner air from less fossil fuel emissions
  • Healthier community
  • More options for transportation/getting around
  • Save money by being more energy efficient
  • Reduce heat island effect
  • Reduce flooding impacts
  • Build resiliency and extend the life of infrastructure
  • Improve food and water security
  • Extend the lifespan of the County landfill

How much will I be charged?

These are the proposed rates; the City Council must approve.

Residents will see a charge of $3.25 on their electric bill and $2.25 on their gas bill every month.

Commercial and industrial properties will need to contact Xcel Energy to find your classification. When contacting Xcel Energy, please identify yourself as a city of Northfield commercial user.

Xcel Energy Business Solution Center
1-800-481-4700
Email Business Solution Center (email may be quicker)

Electric

ClassAmount per premise per month
Residential$3.25
Small commercial and industrial: non-demand$4.00
Small commercial and industrial: demand$32.50
Large commercial and industrial$999.00
Public street lighting$0.00
Municipal pumping demand$0.00
Municipal pumping non-demand$0.00

Gas

ClassAmount per premise per month
Residential$2.25
Commercial firm: non-demand$12.50
Commercial firm: demand$485.00
Small interruptible$99.50
Medium and large interruptible$1,880.00
Firm transportation$0.00
Interruptible transportation$0.00


Why now?

The City Council is looking at franchise fees because of feedback from residents. Residents who have gone through a street assessment process have stated they do not like the large unanticipated assessment and the appraisal process is complex and exhausting to figure out the assessment amount. The appraisal process and bonding make the overall projects more expensive. Scheduled assessments in 2020 average $6,800.

By implementing a franchise fee, residents will pay a flat fee per month. This revenue replacement is more manageable and eliminates an unanticipated expense for the projects the City has planned.

Construction projects

Is this just another tax?

This is revenue replacement - a different revenue source for the city. Franchise fees will replace special assessments.

Why not add this fee to the water bill? Why don’t you just charge a ‘Street Fee’ to each property and bill it similar to a water bill? Why go through a third party for collection?

State law does not allow a city to charge a direct street fee for maintenance. State law does allow for the collection of a franchise fee from utility service providers for their use of the right-of-way. That is why we are proposing to charge this fee to the utility companies and then dedicate its use to maintain the city street system. The State Legislature is currently working on a bill (SF 607 and HF 745) that would allow for the direct billing by a city for a street maintenance fee. This same idea has been discussed at past legislative sessions but has yet to be passed and signed into law.

I live in an apartment, town home or manufactured home. Will I be charged the fee?

Yes, you will pay the standard residential fee.

I live on a private road or county road. Will I be charged the fee?

Yes, you will pay the standard residential fee.

What if I am paying for a street assessment?

Continue to pay your street assessment. A reimbursement plan will be put in place to offset the franchise fee.

When will this go into effect?

The City Council is still determining the exact schedule. We anticipate franchise fees going into effect around March 2021.

When do I have to pay the franchise fee?

The franchise fee is included on your gas and electric bill every month.

How long will the city have franchise fees?

The fee is expected to be a long-term funding option for the city and not anticipated to be eliminated.