DES MOINES — The city of Des Moines may end up increasing the franchise fee it charges on the gas and electricity bills of city residents just so it can turn around and give the money back to them to repay past overcharges, the city attorney said Monday.
The option was approved in a state funding bill passed by the Iowa Legislature and signed Thursday by Gov. Terry Branstad.
It allows Des Moines city officials to increase the franchise fee to 7½ percent from the current 5 percent for up to seven years. The city first must hold a referendum. If voters approve it by a simple majority, the city could raise the fee. The Legislature also had passed the measure last year but Branstad vetoed it because he was disappointed lawmakers didn’t pass his priority, broader property tax reform. This year the Legislature gave Branstad his tax reform bill and again approved the increased franchise measure for Des Moines and Branstad signed it.
It’s one possible resolution to a lawsuit that has been slowly moving through the court system since 2004 and has been appealed to the Iowa Supreme Court twice. The U.S. Supreme Court last year declined to take the city’s appeal.
The case now rests in Polk County District Court in Des Moines where attorneys are working out the details of how to repay the fee the city collected on the bills of about 100,000 MidAmerican Energy gas and electricity customers. The courts have ordered the city to repay the customers nearly $40 million in overcharged franchise fees between 2004 and 2009.
The city has contended in court appeals that it makes no sense to increase the franchise fee or boost property taxes on citizens to just to turn around and give them their own money back.
City Attorney Jeff Lester said it now appears it will cost Des Moines utility ratepayers $1.35 for every $1 they get back in the court-ordered refund. He said attorney fees and paying an administrator to coordinate the repayment process push the cost of the refund higher than the refunded amount.