pothole generic road

File photo by Connor Cummiskey

Pending a final reading of the ordinance, Ramsey residents can expect road maintenance fees will show up on their utility bills in the near future.

The Ramsey City Council on July 14 approved charging residents $14 per month in franchise fees to fund roads. The motion passed 4-2, with council members Dan Specht and Debra Musgrove dissenting.

Prior to approving the motion, the council held a public hearing on the first reading of an ordinance that would institute franchise fees in the city of Ramsey. The fees would add $7 to residential utilities, both gas and electricity, for a total of $14 a month. The money would go directly to funding future roadwork.

Approximately eight residents spoke or submitted comments to the council during the public hearing. Five of those speakers were explicitly opposed to franchise fees, while two comments during the hearing were in favor.

A survey on Ramsey’s website showed 17 of 24 respondents opposed franchise fees, with the remainder in favor.

Franchise fees are a fee a city can place on a utility company for the use of city right of way to deliver services. The fees are considered a tax on residents by the Ramsey City Council, because the fees will be passed on to consumers. Franchise fees have become an increasingly popular method for cities to pay for maintaining roads.

Jim Bendtsen, a Charter Commission member, spoke against the franchise fees, arguing it was the wrong solution to Ramsey’s road funding problem.

“Franchise fee is actually a tax, and it’s a fraudulent and corrupt use of both the definition and concept of a franchise fee,” Bendtsen said. “A franchise fee is supposed to be charged to a utility such as a cable, TV or internet provider both for costs to the city of maintaining the infrastructure that they use and a fee to the business to be allowed to have a franchise to carry out this business.”

He called it a regressive tax — a tax that disproportionately impacts poorer people by taking a larger percentage of their income than wealthier taxpayers. He also argued it impacts residents whether or not they own property or use roads.

Council Member Chris Riley pointed out the tax levy is based on property value, which may be correlated to income but is not directly related.

One woman asked why Ramsey’s budget lacks the funds to make sure the city’s roads are the best in the state. She asked what could be cut from the budget to pay for the roads.

Another resident asked what happened to the money from the multifamily homes that have been built over the last few years. Finance Director Diana Lund said the additional taxes generated by those properties after they were developed in the COR go into a Tax Increment Financing district, which limits where those funds can be used.

County Commissioner Matt Look, who is a resident of Anoka but owns property in Ramsey, urged the council to consider what it is funding and whether those projects are needs or just desires.

One man decided to speak up in support of franchise fees, arguing they were the cheapest way to pay for roads in Ramsey. He pointed out that residents pay interest on top of special assessments and argued that the franchise fee was no more regressive than special assessments.

A written comment submitted to the council from residents on Radium Circle pointed out that the $14 per month fee would still be less than the $7,000 assessment when calculated over its 30-year lifetime. The $14-per-month fee equals $168 per year which would cost approximately $5,000 over a 30-year period.

Council Member Chris Riley responded to the argument that assessments are paid by the people who benefit by arguing that entire neighborhoods may benefit from a road project, but only the houses directly on the road pay. When asked about what protections residents would have from council members increasing the franchise fee, City Administrator Kurt Ulrich said the council would have to go through the public hearing process to change the ordinance that governs the fee amount.

Musgrove criticized the amount of money Ramsey budgets for roads.

“Our road maintenance fund — $500,000 — is laughable,” Musgrove said. “We need to have a much higher budget for roads if that’s something we have as a priority.”

Lund clarified that the city pays $500,000 within the general fund and another $500,000 is spent on the debt related to road construction.

Mayor John LeTourneau pointed out that the 75% of the costs of road work are paid through bonding. The debt servicing on those bonds is accounted for in the tax levy and remains in the levy for the life of the bond, according to Lund.

Musgrove clarified that she would prefer to see road costs accounted for as a line item in the budget in such a way as not to accumulate debt.

Specht argued that the property tax was the most fair way to fund the roads, pointing out that’s how the city provides most of its other services. He also reaffirmed the point that the tax levy can be refunded on state taxes.

Riley argued that only 10% of people itemize deductions. Those that don’t would not benefit from a tax refund.

Riley also said that if the city were to put the estimated costs of the roads onto the tax levy it would be an additional 15% on tax bills.

Council Member Mark Kuzma argued that putting the road construction on the tax levy would increase what residents pay by about the same amount franchise fees would.

An initial motion by Musgrove to put the road funding on the tax levy failed.

A brief presentation led the discussion, laying out the problem Ramsey faces funding its roads. There are more than 180 miles of paved city streets in Ramsey. Currently the city uses $500,000 per year from the general fund for crack sealing.

Most of the city’s streets were built between the 1970s and 1990s. The streets are deteriorating faster than the city can fund reconstruction, according to the presentation.

Currently Ramsey assesses benefiting property owners at 25% of project costs with the rest paid for through the tax levy. The city is currently paying $500,000 in debt payments on roads, Ulrich said. Under the current system that would surpass $2 million annually by the end of the decade, according to city estimates.

LeTourneau argued that the franchise fee is the most fiscally conservative option the city has.

“Fiscally conservative means we need to monitor how the money is being spent in the city to the best interests of the community,” LeTourneau said. “We are not doing things that are reckless or not conservative. And the reality around accumulating that much debt and that much in interest payments doesn’t feel fiscally conservative to me.”

The final reading of the ordinance will be July 28. If it’s approved, the first bill can be expected in October, Ulrich said.

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