Residents give little thought to city roads...unless they have potholes, that is. Few realize that cities generally don't pay for the original construction of neighborhood roads--those are usually paid for by developers (and passed as price of a new home). Fewer still think about how those roads will be replaced when they are at the end of their useful life.
Cities usually pay for the rebuild of neighborhood roads in two ways. One way is to "specially assess" the properties in the neighborhood. This can be an unexpected (and expensive) shock to residents when its their turn, with residents commonly having to pay $7,000-$10,000 (usually over 10 years) to have their road rebuilt.
Other cities consider the cost of road reconstruction to be a city-wide burden. These cities generally use the ad valorem property tax to have everyone pay a little bit every year towards the construction of certain roads.
Eden Prairie faced the issue a few summers back as the city decided that historical sources of funds for road reconstruction were inadequate because the city wanted about $2.5 million/year in funds dedicated to roads alone. The city didn't like the special assessment route, presumably because that was certain to upset neighborhoods when it was their turn to pay. The city also didn't like the idea of adding a new cost to the ad valorem property tax, as this would (by the city's own numbers) have led to a 6% annual increase in taxes for this line item alone!
So, what did the city do? The city created a brand new fee--a franchise fee for utilities such as Xcel energy---to charge the utility for the right to have power lines under and adjacent to city roads and rights-of-way. This avoided the need to special assess and avoided having residents get tax statements showing a healthy increase in taxes from one year to the next.
And at the public hearing in the summer in which this was passed..no one complained? Wait a second? Why didn't Xcel energy complain? After all, it was going to be assessed a "fee" for every property which received electricity from it? To the tune of over $2 million every year...
The answer is obvious---and certainly was well known to the city as it discussed this fee. Xcel energy didn't complain because it had no intention of paying the franchise fee---it simply passed this cost on to every customer it had in Eden Prairie. Don't believe me? Look at your utility bill. There is a line item for "frachsise fee" which didn't exist four years ago. So, contrary to the talking points by the city council at the public hearing...residents really did feel a bite because of this new city spending.
So, the franchise fee is being assessed upon the very same residents who otherwise would have been asked to pay the 6% tax increase. Only this way, most residents probably didn't realize what happened. And the city council can avoid telling people that they raised taxes by 6%. The only economic downside to residents is that a franchise fee on a utility bill can't be written off on your taxes, but property taxes can be.
Good government? You answer that question.
