City Council Approves First Reading to Adopt Franchise Fee

On April 4th, the Marion City Council unanimously voted to move forward in adopting a new franchise fee to support investments in public safety. The council passed the first of three required votes in support of the new fee. The final two readings of the ordinance will take place later this month. Once fully adopted, the franchise fee will impose a 4% charge on all gas and electric utility bills in the city of Marion. A 1% local option sales tax will no longer be collected on utility bills, making the net fee to be 3%.

Between the anticipated opening of a new fire station, continued community growth, and changes in the public’s expectation of services, the city is pursuing new ways to raise revenue to maintain the community’s excellent safety record.  During this year’s budgeting process the Marion City Council examined two ways that public safety can be funded. These included property taxes or franchise fees tied to natural gas and electric bills. 

Franchise fees differ from property taxes in several key ways:

  • All utility users pay franchise fees, regardless of property tax status as taxable or exempt
  • Fees are tied to usage, not property valuations, so consumers can have some influence on what they pay
  • The delay between demand and resources is eliminated-fees are collected starting with utility bill collections, rather than taxes that are not collected for several years

In FY 20, the franchise fees will allow the City of Marion to hire and in subsequent years fund seven (7) new public safety personnel:  3 new firefighters, 2 new patrol officers, a police evidence technician, and a communications operator.  If these costs were to be attributed to property taxes, it would be $0.63/1000 for FY20.  That would have increased the rate from $14.22 to $14.85.  Instead, the council held the rate steady from the prior year.

Marion Economic Development Corporation provided the only public comments received by City Council. While MEDCO did not support or oppose the adoption of the franchise fee, information was provided to council regarding Marion’s total tax rate competitiveness to our pier communities. It is anticipated that the fee could begin showing up on utility bills over the next six months.