City will study franchise fees to fund roads

Cloquet city councilors gave the go-ahead to city staff Tuesday to look into charging franchise fees to utility companies as a way to raise money to pay for street and infrastructure improvements.

City administrator Tim Peterson reminded the council that they decided to hold off on the fees during the pandemic because a lot of people were struggling financially.

“We have zero dollars going towards street and utility infrastructure projects moving past this year,” Peterson told the council. “Franchise fees were kind of the next way we were going to move into that [paying for projects].”

Peterson suggested the city investigate charging the gas and electric utilities a franchise fee. It would be similar to the way the city works with Mediacom, except that the cable TV franchise fee is supposed to be used in a certain way (usually for the cable access channel) as regulated by the state. The utility franchise fees could be delegated to roads or infrastructure; it would be up to the city’s elected officials to choose, he said.

“The nice thing is franchise fees get spread out a little more equitably among the population,” he said. “Property taxes have their benefits and their disadvantages. Franchise fees are very much a ‘use’ tax. The more you use, you can change the way the fee is structured.”

It can be simple, like a cost per user, broken down into categories such as residential, light and heavy commercial, light and heavy industry, for example.

“It’s a really good step in the right direction, where we can start budgeting projects out annually … and use funds specifically for the greatest needs in the community,” Peterson said.

Councilor Kerry Kolodge cautioned that utilities would likely pass on any franchise fees to users.

Peterson said it is included as a separate line item on people’s bills. He also suggested looking at a franchise fee of $4 per residential customer. At that level, it wouldn’t pay for all street and infrastructure projects, but could bring in $500,000 a year total to help with capital projects in the city. Peterson said it would probably take six to eight months or more to implement franchise fees, and there would be public hearings along the way.

“It will be written very specifically, to spend the money on things people think are the most important,” he said, adding that it wouldn’t simply flow into the city’s general fund.

In other matters Tuesday:

• A temporary sick policy that allowed city employees to use time during the pandemic without it counting against the sick time bank for quarantining was ended. “We had 63 instances, some multiple times, but zero employee-to-employee transmissions [of Covid],” said human resources director James Barclay. “We also had nine positive cases, but zero transmissions.”