Franchise fee increase defeated
Mel Tiede, director of corporate services, was back before council on Oct. 1 to once again discuss the natural gas franchise fee that had been originally presented at the Sept. 3 meeting.
“Franchise fees are a recognized source of revenue for municipalities. When a community elects to have no franchise fee, or a lower than average franchise fee, the resulting foregone revenue would need to be made up in some other way,” said Tiede.
The present inflationary prices are greater than have been witnessed in the past number of years.
“The town is not exempt from inflationary pressures, when you combine these inflationary pressures with the staffing initiative that council approved recently, administration and council have significant challenges I anticipate to balance the 2015 budget,” said Tiede.
The town’s current franchise fee rate is 11.18 per cent, and Tiede was coming forward with the request to raise it to 16.62 per cent. The increase would raise the average users fees $1.90 per month.
Tiede explained that the town has properties that are exempt from paying property taxes within the municipal boundaries. They are general institutions like schools, hospitals, churches, certain senior care facilities and the like. All of these facilities do, however, use electricity and natural gas and the franchise fee is payable by all that consume electricity and natural gas there are no exceptions.
These properties all border roadways and benefit from roads, street lighting, town sidewalks, and can also use the town-owned and operated water, sanitary sewer and stormwater systems.
These systems at times have been the beneficiary of property taxes where the system has utilized town financial reserve that has been used to fund a capital project or an operating initiative. The most recent example, said Tiede, would be the reserve that funded a third of the cost of the Wildflower Reservoir.
The use of franchise fees is a generally accepted method of raising funds in Alberta. Only the town of Nobleford out of 69 other municipalities didn’t have a franchise fee, and of those 75 per cent listed their rates as greater than 11.18 per cent.
Councillor Brad Walls is against it no matter how much it is. He would rather taxes be increased than nickel and dime the residents.
Councillor Pat Fule questioned if the funds raised could be earmarked for specific projects, such as a new recreational facility.
“We have to find ways to improve the town, we’re doing it with our parks and pathways and major projects. This is just one more way to find some funds for a needed project and it would impact a lot of families in this town, a lot of seniors too,” said Fule.
Councillor Rocky Blokland argued against both the fee increase and Fule’s suggestion of earmarking the funds, stating that while it may only be a $1.90 increase for natural gas, all of the other bills are also going to go up, creating a problem for seniors, or those on fixed incomes.
“In this instance when I think about an increase in a franchise fee … for those people on a fixed income I know from past experience that they can turn off their lights, that they can turn down their furnaces or put an extra blanket on the bed,” said Councillor Denise Peterson.
“I know that they have some mechanism for control over those issues that relate to franchise fees, they have no control over increasing taxes which will certainly be facing if we want to provide services to our community at the rate the community is demanding them.”
Walls made a motion to accept everything as information. Peterson, Mayor Michael Ell, and Fule voted against it, stating a decision needed to be made. Councillor John Rempel was not at the meeting, and the motion was defeated because it was a tie vote.
“I think there is a certain amount of proxy to accepting a significant portion of a franchise fee and not accepting an increase that works to the average as we’ve been presented with and speaking against motions like this in terms of the benefits that could ensue for community knowing full well that it’s going to result in a tax increase to citizens where they have no control, because you can’t turn out the lights on a tax increase, you have no power over limiting it,” said Peterson.
“By voting against this motion we are in effect holding our citizens hostage to a tax increase over which they will have no control.” Councillor Fule made a motion in favour of the increase, which was again defeated due to a split vote.
“The increase in net municipal taxation to the town has increased on average 3 per cent per year over the last two years. New residential and commercial building in that time period has raised some of the additional taxation, the balance would be as a result of inflation and increasing costs to provide services to the community,” said Tiede.
For every $100,000 of operating expenditure there would be a one per cent increase to taxes. Therefore an additional $1 million of net additional expenditure would add 10 per cent to taxes in order to balance the budget. Without an increase to the franchise fee the money will still be needed and there will likely be a need to increase taxes. At the end of the council meeting Chief Administrative Officer Dwight Stanford stated that there would likely be “a pretty good tax increase.” The budget is scheduled for discussion at the fall workshop, being held at the beginning of November. The electricity franchise fee was also brought up for discussion and defeated with the same split voting amongst the councillors.