councilmen gregg obren and ron mussman listen to finance director anita dalton

Clinton City Councilmen Gregg Obren, left, and Ron Mussmann listen to City Finance Director Anita Dalton during a discussion of franchise fees during Tuesday’s City Council meeting.

CLINTON — The Clinton City Council proposed adding a 4% franchise fee to electric and gas bills of customers of Alliant Energy during its Tuesday meeting. A public hearing for the proposal is set for 5 p.m. Tuesday, Feb. 25.

Council members amended the resolution fixing the public hearing to specify that the franchise fee be equal to 4%. The increased revenue is needed to make up a general fund shortfall of more than $1 million for fiscal year 2021, city officials said.

Ward 4 Councilwoman Rhonda Kearns proposed a 3% fee, directing 1.5% to the general fund and 1.5% to the debt levy. Though a higher fee would lower property taxes by lowering the debt service levy, Kearns said residents don’t see new fees as benefits. “I think they see it more as an increase,” Kearns said.

With a fee of 3%, the overall property tax levy would increase from $16.32 to $16.67. To make a decrease in property tax levy possible, the franchise fee would have to be at least 3.5%, according to a presentation by City Administrator Matt Brooke last week.

“If we want to help the citizens, we have to do 3.5%,” Councilman Bill Schemers said Tuesday.

Because the property tax levy is assessed for each $1,000 of assessed value, owners of more expensive properties will save more, Brooke said. A 5% franchise fee would produce the biggest savings to property owners because 3.5% would go toward the debt service levy, resulting in a property tax rate of $15.19.

The biggest losers are businesses with higher electric and gas bills, Brooke said. Businesses experience “sticker shock” when the fees are implemented, but statewide the fees haven’t negatively impacted business, Brooke said.

The decrease in property tax negates some of the cost of the new fee. The net increase might be $80 or $90 per year for commercial properties, Brooke said.

Locally, Brooke hasn’t heard many complaints from businesses about the franchise fee, he said.

Ward 2 Councilwoman Cyara Peterson moved that the city set the franchise fee at 4% with 1.5% going to the general fund and $2.5% to the debt service levy. That will reduce the levy rate to $15.96.

The council approved the rate.

While the 4% fee takes care of the city’s immediate needs, At-Large Councilman Sean Connell suggested that the fees be reviewed in a couple of years and reduced if possible.

The fee will be evaluated every year, said Clinton Mayor Scott Maddasion, and will be reduced when feasible.

Brooke expects to see an increase in the city’s assessed value in the future, making lower tax rates possible, he said. The city has “numerous” businesses growing and new businesses coming to Clinton.

New housing and apartment complexes are in the planning stages. These projects will result in increased total valuation and lower tax rates, Brooke said.

According to the resolution to fix a date for the public hearing on the proposed ordinance to establish a franchise fee, the fee will pay for inspecting, supervising and otherwise regulating the electric utility franchise. Money in excess of that amount will be used for property tax relief and other projects such as energy conservation measures for low-income homeowners and equipping fire, police and emergency services.

The city will eventually charge a franchise fee for REC customers as well, Connell said.

Cities may assess franchise fees on electric and gas utility bills within their boundaries. Fees are assessed on the bills of customers of private companies, not usually customers of cooperatives or city-owned utilities. Typically, a franchise fee recoups the cost of the utility companies’ use of public space for energy infrastructure such as power lines or gas pipelines.

The city will conduct informational meetings for the public at 7 p.m. Tuesday, Feb. 18 and Thursday, Feb. 20.