City Council Considers Adoption of Franchise Fee

The Marion City Council will consider adopting franchise fees to fund public safety and offset property tax increases. If 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 would no longer be collected on utility bills should the franchise fee be adopted, making the net increase to be 3%.

The City of Marion has recognized a need to invest more in public safety. Between the anticipated opening of a new fire station, continued community growth, and changes in the public’s expectation of services, the city has is looking at new ways to raise revenue to maintain the community’s excellent safety record.  During the recent budgeting process the Marion City Council examined two ways that public safety can be funded. These include property taxes or franchise fees tied to natural gas and electric bills.  After robust discussion the council selected franchise fees, collectively feeling it is a more equitable way to fund planned investments.  

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.

Both Hiawatha and Cedar Rapids have franchise fees of 3%.  In FY20 the respective property tax rates of the three cities will be as follows:

  • Cedar Rapids $15.44/1000
  • Hiawatha $14.99/1000
  • Marion $14.22/1000.

A public hearing on the franchise fees will be held on Thursday, April 4th at 5:30pm in the council chambers.