HomeMy WebLinkAboutA002 - Gas Utility Franchise report ATE i �
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TO : Steven L. Schainker , City Manager RECL,21 a 0
FROM : Bob Kindred , Budget Analyst :04~4VI APR
DATE : April 13 , 1984 C�T_X OF AMES
SUBJECT : Gas Utility Franchise Report
Section 362.4 of the Iowa Code vests cities with the power to grant non-
exclusive utility franchises for terms not to exceed twenty-five years. (Copy
of 362.4 attached.) Although this section does not empower cities to tax util-
ities, there is precedent within the state for cities to impose a 'franchise fee' .
In October of 1960, the City of Ames entered into a 25 year gas utility
franchise agreement with Iowa Electric Light and Power Company. (See Appendix
'B' in Municipal Code.) Based upon the utility's recent request to begin re-
negotiating this agreement, the suggestion was made at the City staff goal setting
session that other Iowa Municipalities be surveyed regarding their respective
gas franchise arrangements. The Finance Department has conducted such a survey
of the 10 largest cities in the State, giving special attention to possible revenue-
generating provisions in the various franchises. A summary of the survey's results
is provided below.
CITIES WITH NO FRANCHISE AGREEMENT.
DUBUQUE - This city has not entered into a gas franchise with the local
gas utility.
CITIES WITH FRANCHISES BUT WITHOUT FRANCHISE FEES.
CEDAR RAPIDS - Has 25 year franchise with Iowa-Illinois Gas and Electric
Company, effective thru August, 1986.
CLINTON - Has 25 year franchise with Interstate Power Company, effective
thru 1989.
COUNCIL BLUFFS - Has 25 year franchise with Peoples Natural Gas, a division
of Northern Natural Gas Company, extending thru 1995.
Agreement provides that if the Iowa General Assembly insti-
tutes a valid taxing statute authorizing the city to collect
a tax on gas revenues, the company will include such a tax
as a separate item on it's customers bills. The Council
Bluffs Finance Director stated that, although they presently
receive no franchise fees, they will most definitely attempt
to include a franchise fee in their next negotiation session
in about 11 years. Their agreement does require the utility
to install new distribution systems in lawfully designated
urban renewal areas.
DAVENPORT - Has franchise with Iowa-Illinois Gas and Electric Company, approved
by the City's voters in 1983 for a 25 year period. The City's
'Public Utility Regulations' ordinance requires public utilities,
upon request of the City Administrator, to file with the City
copies of their Annual Reports to stock holders, State and Federal
Reports, Energy Conservation Reports, etc.
p,. 2
Steven L. Schainker
April 13, 1984
IOWA CITY - 25 year franchise agreement, renewable in 1984, is currently
being renegotiated. The City Council is very concerned over the
utility's proposed rate increases, and is considering a short-
term franchise renewal (i.e. , 1 to 5 years) .
WATERLOO - 25 year franchise agreement extends thru 1989.
CITIES WITH FRANCHISE AGREEMENTS AND FRANCHISE FEES.
DES MOINES - Has 25 year gas franchise agreement with Iowa Power and Light
Company, extending thru September 1985. City and company
attorneys are currently renegotiating the agreement.
Under gas franchise ordinance, City collects 'an annual fran-
chise, occupation, or privilege tax equal to two percent (2%)
of the gross receipts of the said company derived by it from
the distribution and sale of gas to consumers within the
City of Des Moines. ' (Note: Since the Iowa Code does not
provide for cities to collect a utility franchise 'tax' , this
should more properly be termed a 'fee' .)
This tax is imposed for the use and occupation of the public
streets, highways, avenues, alleys, bridges, and public places.
This fee is paid to the City on a semi-annual basis. During
FY 1983, the City of Des Moines received $1,492,813 from this
revenue source.
Note: Des Moines also imposes a 1% franchise tax on electric
power sold within the City.
SIOUX CITY - Has an 18 year franchise agreement with Iowa Public Service
Company, extending thru 1995. The utility pays the City 'a
fee equal to 2% of the gross revenue derived from the sale of
gas made to consumers within the corporate limits of the City. . .
to compensate the City for the grantee's use of the streets,
alleys, and public ways for its mains, underground conduits,
pipes, and other gas utilities. ' This fee is paid to the City
on a monthly basis.
During FY 1983, this revenue source generated $622,173 for the
City of Sioux City.
CITIES OWNING/OPERATING GAS UTILITIES.
CEDAR FALLS - The City of Cedar Falls started it's own gas utility in 1928.
The 1984 Budget shows $8,726,900 in operating expenses, and
$9,610,000 in operating revenues. The gas utility is com-
bined with electric and water utilities to form Cedar Falls
Municipal Utilities, which is administered by a 3 member
Utility Board.
The Cedar Falls Utility's 1984 Budget includes a $162,000
'in lieu of taxes' transfer from the gas utility to the City's
General Fund. (A copy of this Budget is available from me
for your reference.)
Note: Besides Cedar Falls, there are no other large-or medium-
sized Iowa cities which own and operate their own gas utilities.)
p.. 3
Steven L. Schainker
April 13, 1984
I am attaching copies of franchise ordinances received from Cedar Rapids,
Davenport, Des Moines, and Sioux City to John Klaus' copy of this report. If
you are interested, copies of the survey responses are available for your review.
Further information can be gathered at your request.
Attachments
cc: John R. Klaus
J Paul Wenbert
Betty Jo Harker
Arnold 0. Chantland
1364.1,POWERS AND DUTIES OF CITIES 1
364.1 Scope.A city may,except as expressly limit- §5738, 5904, 5904-c1, 5905-5909, 6128, 6131-613t
ed by the Constitution, and if not inconsistent with C39, §5738, 5904, 5904.1, 5905-5909, 6128,6131-
the laws of the general assembly,exercise any power 6134;C46,50,§368.1,386.1-386.7,397.2,397.5-397A
and perform any function it deems appropriate to pro- C54,58,62,66,§368.2,386.1-386.7,388.5-388.9,39r,.z
tect and preserve the rights, privileges,and property 397.5-397.8; C71, 73, §368.2, 386.1-386.7, 397.1
of the city or of its residents, and to preserve and 397.5-397.8;C75,77, 799 81, §364.21
improve the peace, safety, health, welfare, comfort, Referred to in§M29
and convenience of its residents. This grant of home
rule powers does not include the power to enact pri- 364.3 Limitation of Powers.The following are Iim
vate or civil law governing civil relationships,except itations upon the powers of a city:
as incident to an exercise of an independent city 1. A city council shall exercise a power only by the
power.[C51,§664;R60,§1047,1056,1057,1071-1073, passage of a motion, a resolution,an amendment,Of `
1095; C73, §454-4569 482, 524; C97, §680, 695, 947; an ordinance.
C 13,§695;C24,27,31,35,39,§5714,5738,6720;C46, 2. A city may not provide a penalty in excess of a
50,§366.1,368.2,420.31;C54,58,62,66,71,73,§366.19 one hundred dollar fine or in excess of thirty day'
368.2,420.31;C75,77,79, 81, §364.11 imprisonment for the violation of an ordinance.A'
amount equal to ten percent of all fines collected by
364.2 Vesting of power-franchises. municipal corporations shall be remitted quarterly
1. A power of a city is vested in the city council the county treasurer of the county in which the m
except as otherwise provided by a state law. nicipal corporation is located for deposit in the coon
2. The enumeration of a specific power of a city general fund. However, one hundred percent of
does not limit or restrict the general grant of home fines collected by a city pursuant to section 321.
rule power conferred by the Constitution.A city may subsection 1,shall be retained by the city.
exercise its general powers subject only to limitations 3. A city may not set standards and requiremen
expressly imposed by a state or city law. which are lower or less stringent than those in'
3. An exercise of a city power is not inconsistent by state law,but may set standards and requiremen
with a state law unless it is irreconcilable with the which are higher or more stringent than those i
state law. posed by state law,unless a state law provides oth
4. a. A city may grant to any person a franchise to Vise.
erect, maintain, and operate plants ands stems for 4. A city may not levy a tax unless s cific
e ectrrc fight and power, heating, telephone, tele- authorized by a state law. I1160, §1071-1073, 10A
graph, cable television, district telegraph and alarm, C73,§482,524;C97,§668,680,947;513,§668;C24,277,
motor bus,trolley bus,street railway or other public 31,35,39, §5663,5714,6720;C46,50, §363.36,366.
transit,waterworks,or gasworks,within the cityfor a 420.31; C54, 58, 62, §366.1, 368A.1(10), 420.31;C66,
term of not more than twenty-five years. The fran- 71, 73, §366.1, 368.2, 368A.1(10), 420.31;C75,77,79,
chile may be granted,amended,extended,or renewed 81, §See also conso con stitutional Amendment 2 of 1968
only by an ordinance,but no exclusive franchise shall
be granted,amended,extended,or renewed. 364.4 Property right.A city may:
b. No such ordinance shall become effective unless 1. Acquire, hold, and dispose of property outside
approved at an election.The proposal may be submit- the city in the same manner as within.
ted by the council on its own motion to the voters at 2. By contract,extend services to persons outside
any city election. Upon receipt of a valid petition as the city.
defined in section 362.4 requesting that a proposal be 3. Enact and enforce ordinances relating to ci
submitted to the voters,the council shall submit the property and city-extended services outside the ci
proposal at the next regular city election or at a special [SS15, §741-d,741-g;C24,27,31,35,39,§5773;C
election called for that purpose prior to the next regu- §368.41,368.42;C50, §368.42,368.56;C54,58,62,
lar city election.If a majority of those voting approves 71,73, §368.18;C75,77,79,81, §364.4]
the proposal the city may proceed as proposed.
c. Notice of the election shall be given by publica- 364.5 Joint action-league of municipalities
tion as prescribed in section 49.53 in a newspaper of city or a board established to administer a city utility,
general circulation in the city. in the exercise of any of its powers, may act jointly
d. The person asking for the granting,amending, with any public or private agency as provided in chap
extension,or renewal of a franchise shall pay the costs ter 28E.
incurred in holding the election,including the costs of The financial condition and the transactions of the
the notice. A franchise shall not be finally effective league of Iowa municipalities shall be audited in the
until an acceptance in writing has been filed with the same manner as cities as provided in section 11.18.
council and payment of the costs has been made. It is unlawful for the league of Iowa municipalities
e. The franchise ordinance may regulate the con- to provide any form of aid to a political party or to the
ditions required and the manner of use of the streets campaign of a candidate for political or public office•
and public grounds of the city, and it may, for the Any person violating or being an accessory to a viola
purpose of providing electrical,gas,heating,or water tion of this section is guilty of a simple misdemeanor,
service,confer the power to appropriate and condemn A city may enter into an agreement with the federal
private property upon the person franchised. [C51, government acting through any of its authorized agen-
§664; R60, §1047, 1056, 1057, 1090, 1094, 1095; C73, cies,and may carry out provisions of the agreements
§454-456,471,473,474,517,523,524;C979§695,720- necessary to meet federal requirements to obtain the
722,775,776;S13,§695,720-722,776;C24,27,31,35, funds or co-operation of the federal government or►t. '