The Otsego City Council learned more about franchise fees and the steps involved in implementing them at a Sept. 27 work session.

Cities have the legal authority to implement franchise fees to raise revenue or defray increased municipal costs accruing as a result of utility operations. Otsego City Council members are focused on the idea that franchise fees could help with their program of pavement management, according to Otsego City Administrator Adam Flaherty.

The soonest it could be implemented, if the council were to move forward, is the summer of 2022. Franchise fees remove the need for costly assessments to residents and building owners by providing a major source of revenue for pavement management projects that gets regularly billed to all residents and building owners.

A lot would have to be done between now and then to make them a reality by next summer. The first step toward implementing a franchise fee is the adoption of an ordinance that lays the groundwork but does not establish the franchise fees.

The second step is the city must notify the utility company at least 90 days (or 60 days under the older CenterPoint franchise agreement) before the city adopts the second ordinance implementing the franchise fee. This gives the utility company an opportunity to prepare for the possible implementation of the franchise fee.

The third step is for the council to consider an ordinance to implement the franchise fees, which can vary depending on customer classification (i.e. residential, commercial, industrial).

The franchise fees apply to all utility users, even those whose entities may be otherwise exempt from property taxes, such a religious organizations.

In the fourth step after the council adopts the second ordinance implementing the fee, the city is required to notify utility companies at least 90 days before the franchise fee commences.

The Otsego City Council is looking to embark on this four-step process this fall.

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