Franchise fee on gas utility could raise $36,000 a year
Park Rapids plans to implement a franchise fee on the gas utility with hopes of generating about $36,000 in revenue per year to help a 2010 budget shortfall.
The fee will be nominal, said city administrator Bill Smith. The council has talked about implementing a $1 or $2 a month fee per account.
In August of last year the Park Rapids City Council first received information about how a franchise fee worked. The council decided to look at the fee again in light of an expected general fund shortfall due to a second 2010 Local Government Aid unallotment.
There are two ways to have a franchise fee. The first is based on the volume of gas, or a percentage of the total bill. The second is a flat base fee.
A Minnesota Energy Resources representative last summer said that if a city wants to implement a franchise fee, the flat fee is encouraged because it's easier to administer.
"At this last meeting the council did authorize the staff to go forward with a proposed ordinance and policy," Smith said. "We will draft that up and try to get that to them at the next meeting for them to approve."
The ordinance will need to be read twice before it is passed.
The council is looking at a nominal flat rate.
"In previous discussions, the council said whatever the fee, it would be a minimal fee," he said. "They didn't feel like we ought to use this as a vehicle to try and raise a lot of money. So, a dollar or two dollars, it will be something very minimal."
Smith said the general fund budget committee had been meeting regularly to come up with budget reductions. At this point, he thinks the committee is done meeting because the budget is looking good.
"We're kind of at a plateau," he said. "We're going to wait."
The auditors were in last week and they gave a field report, Smith said. If the anticipated annual adjusting entries are made the city should be able to take care of the remaining shortfall with an adjusting entry, meaning it will finish the year in the black instead of the red.
"It is good news," Smith said. "When we did our revenue projections we used very conservative figures and so our revenues came in a little bit higher than our budget and our expenses came in just a little bit lower than our budget.
"It created a little bit of a surplus, and we think, as of today (Monday), that when the auditors do the adjusting entries that we will have enough money in that little black area to transfer into 2010 and cover the shortfall."
The auditors will come in for an unofficial briefing to city staff in June and the audit will likely be presented to the council in July.