The fast-growing city of Rogers hasn’t had to do many road repairs yet, since half of its roads are less than 15 years old and were built around the same time.
But now, the northwest suburb is anticipating that many roads will need rebuilding at the same time over the next few years. And to pay for that, city leaders are considering starting franchise fees — an increasingly-popular funding method for Twin Cities suburbs.
From Richfield to Wayzata, more cities are using franchise fees to pay for projects instead of levying special assessments or taxes. The cities charge utility companies for using public rights of way, and then utility companies often pass that franchise fee along to customers.
However, in Rogers, a group of residents are rallying against the idea, and plan to pack a July 28 public hearing to urge city leaders not to approve the $9 monthly fee per resident, which would collect $1.1 million a year for the city.
“Once it goes in, it’s never going to stop,” said Shannon Klick, one of the co-chairs of the group, Spend Smarter in Rogers. “Our primary goal is to stay within our means.”
City leaders say they’re trying to be proactive for future work on 85 miles of roads. The city says it could implement a 17 percent increase in property taxes, assess homeowners or do a combination of the two.
But a fourth option, franchise fees, would more evenly disperse costs across the community and save administrative costs of managing assessments, the city says.
“It really spreads the cost over the users in, what we feel, is a more equitable matter,” City Engineer Bret Weiss said. “We’re at a point now where we have significant costs and have to figure out what to do with it.”
Cities turn to fees
More suburbs are opting for franchise fees. In St. Louis Park, the city receives about $2.3 million a year in franchise fees that goes toward street rehabilitation instead of the city using special assessments. Eden Prairie uses $2 million a year from franchise fees for street maintenance. And the city of Wayzata gets $150,000 a year.
Back in 2004, Richfield was one of the first metro cities to start the fees, looking for a stable source to pay for street repairs, City Manager Steve Devich said, adding that cities with levy limits and older infrastructure depend on it. This year, Richfield will get $1.5 million in franchise fees to use for street repairs.
“A lot of first-ring suburbs are facing this across the United States … the cost has significantly increased from when [the roads] were put in,” he said, adding that cities can’t save enough for such major projects and the cost goes up if repairs are neglected. “You’re talking about a very, very significant investment.”
‘Look for other ways’
In Rogers, the 12,000-resident city has discussed options for paying for street repairs over the last year, sending information out to all residents and posting it at pmp.rogersmn.gov. The city held two community meetings in May and June that drew about a dozen people, Weiss said. And now, the public hearing will be held July 28.
“It’s not an easy decision to say ‘we’ll have a new tax for everyone in the city,’” Mayor Rick Ihli said. “But the fact of the matter is the roads will just get worse if we don’t do anything.”
Klick and other residents, however, hope to sway the City Council to nix the fee and use existing tax revenue instead.
“I don’t have a tax base to go to when I have large bills that come in; I have to go to my savings account,” said Ken Hanauska, a retiree and longtime resident, adding he supports fixing roads with existing money: “Look for other ways to do this.”
Eileen Carlin, who moved from New Jersey to Minnesota last year, said approving a new fee or tax will be a slippery slope in continuing to raise taxes.
“I was too glad to get out of New Jersey because the property taxes are ridiculous; it can happen here and I don’t want it to happen here,” she said. “You can’t go backward. Once [taxes] are up, they’re up for good. You can’t undo bad spending.”
Klick added that the fee will be less noticeable to residents than a tax increase. “It feels like they’re trying to slide it under the radar,” she said.
If the City Council approves the franchise fee ordinance, residents would likely see the increase by October — $5 more on monthly electric bills and $4 more on monthly gas bills. The city would also discuss the fee every budget year, Weiss said, and would need council approval to ever use the money on other projects.
“Once we build our roads, we need to maintain them,” Weiss said. “It’s probably the largest asset a city has and there’s a cost to maintain them. Unfortunately, it becomes a political football.”