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1. What is a Franchise Fee

It is a fee that is authorized by State Law and can be established by a city as a way to collect revenue to pay for a specific project or projects. The utilities involved are required to collect the franchise fee by adding a fee to a utility bill.

2. Why is Inver Grove Heights discussing Franchise Fees?

The proposed franchise fees will generate approximately $1,000,000 in revenue annually that will help the city cover unfunded costs relating to city streets, parking lots and trails. On average, the city needs $4,150,000 per year for the next five years to cover costs not paid for from taxes, special assessments or other funding sources. Franchsie fees will help offset the associated costs without increasing property taxes.

3. Why are franchise fees a better option than increasing the property tax levy?

Franchise fees allow the city to diversify its revenue sources. By implementing a franchise fee all utility users pay a fee, not just taxpayers. All who utilize the streets will help pay for them. Franchise fees will apply to all accounts within the city, including tax exempt parcels owned by non-profits and governmental entities.

4. How will franchise fees be reported?

It’s important that the City maintain transparency to residents and businesses. In an effort to be transparent, franchise fees will be reported in the Franchise Fee Special Revenue Fund. All projects paid for out of this fund will be reported.

5. When will the franchise fees be implemented?

Pending council approval, franchise fees will be implemented beginning with January 2018 billings. 

6. What are the proposed fees and have comparisons of tax impacts vs franchise fees been calculated?

Proposed fees and examples of comparisons have been prepared for the same tax parcels used in the budget process. These comparisons are available on the city’s website www.invergroveheights.org – under Residents.

7. How long will the franchise fee be on a bill?

The current franchise agreements with Dakota Electric and Xcel Energy expire in October 2029 and November 2029, respectively. Collection of franchise fees are proposed to end on June 30, 2029, however, it can be renewed upon Council decision at that time.

8. What other cities within Dakota County have franchise fees?

Dakota County cities with franchise fees include Burnsville and South St. Paul.

9. Are Dakota Elecric and Xcel Energy involved in instituting the franchise fee?

By law, Dakota Electric and Xcel Energy have to collect the fee for the city, but were not responsible for the decision to implement the fees. The line item on the bill is called “City Fee.” 

10. Is there an ongoing administration fee charged by Dakota Electric and Xcel Energy for collecting the franchise fee?

Dakota Electric and Xcel Energy do not apply an administrative fee associated with the franchise fee. The full amount of the franchise fee revenue collected by the utility company is remitted to the City of Inver Grove Heights. (This full remittance with no administrative fee assessed to the city is required by the Public Utilities Commission.) The utility companies will no longer pay right of way fees.

11. How can I learn more about franchise fees?

A calendar of upcoming events pertaining to franchise fees is available on the city’s website www.invergroveheights.org – under Residents.

12. What are the proposed monthly fees?

Xcel Energy Gas Rates Proposed

Residential $2.00

Commercial Non Demand $10.50

Commercial Demand $50.00

Small Interruptible $90.00

Medium and Large Interruptible $100.00

Dakota Electric Electric Rates Proposed

Residential $2.75

Small General (non-demand) $3.00

General (demand) $25.00

C&I Interruptible $25.00

Xcel Energy Electric Rates Proposed

Residential $2.75

Small C&I – Non Demand $3.00

Small C&I – Demand $25.00

Large C&I $95.00

Public Street Lighting $6.00

13. Have comparisons of tax impacts vs franchise fees been calculated?

Examples of comparisons have been prepared for the same tax parcels used in the budget process.
Residential Mean Parcel with Taxable Value $231,176
Monthly Tax $5.14
Monthly Gas Franchise Fee $2.00
Monthly Electric Franchise Fee $2.75

Residential Median Parcel with Taxable Value $194,834
Monthly Tax $4.33
Monthly Gas Franchise Fee $2.00
Monthly Electric Franchise Fee $2.75

Business parcels will need to know who their electric provider is and what classification they are charged for electric and gas.
Business with Taxable Value $563,700 $3,058,200
Monthly Tax $14.32 $82.19
Franchise Fee depends on your electric provider and customer class. Fees could range from $13.50 to $195.00.
Xcel Energy Gas Rates Proposed
Commercial Non Demand $10.50 $10.50
Commercial Demand $50.00 $50.00
Small Interruptible $90.00 $90.00
Medium and Large Interruptible $100.00 $100.00
Dakota Electric Electric Rates Proposed
Small General (non-demand) $3.00 $3.00
General (demand) $25.00 $25.00
C&I Interruptible $25.00 $25.00
Xcel Energy Electric Rates Proposed
Small C&I – Non Demand $3.00 $3.00
Small C&I – Demand $25.00 $25.00
Large C&I $95.00 $95.00

14. Franchise Fee Calendar

6/5/2017 City Council Work Session

6/19/2017 City Council Special Meeting 6:00 p.m. to discuss uses

7/10/2017 City Council Meeting 1st Reading of Ordinance

7/10/2017 Call for Public Hearing

7/14/2017 Publication on website to provide additional notice

7/30/2017 and 8/6/2017 Publication in Southwest Review to provide additional notice

8/10/2017 River Heights Chamber Local Issues Meeting

8/14/2017 City Council Meeting Public Hearing and 2nd Reading of Ordinance

9/11/2017 City Council Meeting Continuation of Public Hearing and 3rd Reading of Ordinance

9/17/2017 Ordinance Publication in Southwest Review

9/18/2017 Send Ordinance to Dakota Electric and Xcel Energy

10/1-12/31/17 Xcel Energy requires receipt of ordinance at least 90 days prior to implementation

1/1/2018 Proposed Implementation of Franchise Fees

4/2018 City Collects 1st Quarter Franchise Fees from Dakota Electric & Xcel Energy

 Franchise Fees billed January and February

 Franchise Fees collected February and March

 Franchise Fees remitted April