Iowa City to start charging franchise fees soon

Natural gas and electric utility customers in Iowa City should expect higher bills starting in April.

City Council members said Monday night that they want to vote on an ordinance by the end of the year establishing franchise fees on gas and electrical services. They also set an April 1 goal to start collecting the fees.

The money would primarily go toward hiring firefighters to staff a new fire station and hiring more police officers. There's long been public support for those items, but the city has struggled with how to pay for them.

“There's no way we're going to staff that fire station and get more police officers without it,” council member Connie Champion said.

A new state law allows cities to impose franchise fees of up to 5 percent on natural gas and electrical services.

The council had previously indicated it was interested in the fees, and last night it directed staff to draw up a proposal to be voted on.

Members said the fees are a good source of revenue other than property taxes, upon which the budget is heavily reliant.

“I think to avail ourselves to this opportunity just makes sense,” Mayor Regenia Bailey said.

It is estimated that every 1 percent on gas and electric utilities would generate $840,000 a year for the city. Of that, $352,000 would come from residential customers, with commercial and industrial splitting the difference.

It does not appear that Iowa City will collect the full 5 percent. Interim City Manager Dale Helling said the city would need to set the fees between 2 percent and 3 percent to cover its public safety needs.