Our View - The good, bad and ugly of franchise fees

Printed in the Iowa City Press-Citizen, Oct. 8, 2009

Our View - The good, bad and ugly of franchise fees

There are few "good" features about the franchise fee the Iowa City Council is considering:

• First, the council is only talking about imposing a 2 percent fee -- state law would allow the fee to be as high as 5 percent.

• Two, the proceeds are being used for long-overdue public safety efforts to hire more police officers and to staff a new fire station in the city's northeast corner -- although, if the city were to get someone else to pay for those projects, then the money would be used for "public infrastructure for industrial/commercial economic development."

• Three, rather than have the city look to property owners alone for more money, the fee would allow the city to diversify the money it collects for city services to include individuals and entities that not pay property taxes.

But the overwhelming bad news is the utility companies will pass the cost along directly to their customers, so the "franchise fee" amounts to a backdoor tax.

Despite the council having trimmed about $1 million from this year's budget, it still seems odd for the city to hope to pay for needed public safety services out of new revenue options rather than pay for those services first and then, only if money is available, to look to fund the city's more elective "quality of life" services.

It likewise seems odd, as a backup plan, to use money from a franchise fee -- one that local business and industry owners say only worsens the city's anti-business reputation -- to try to attract more businesses and industries to the city. Interim City Manager Dale Helling has proposed paying down the debt of the city's 420th Street industrial park project if the city gets a grant for the new fire station.

The council's first consideration of the franchise fee is scheduled for Nov. 17. Councilors have until then to persuade a skeptical public that imposing this fee is a necessary step and not just another way for the council to stave off making the hard decisions as it faces what is sure to be another tough budget year.