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Fort Madison Considering Franchise Fees

Feb 11, 2014

It appears that Fort Madison's gain could be Lee County's loss.

Fort Madison could implement new 1% franchise fees on both gas and electric services to help balance the city's budget for the fiscal year that begins July 1, 2014.

City Manager Byron Smith says he is worried that the state of Iowa will not follow through on its pledge to help local governments cover the losses they experience as commercial property taxes are reduced over the next few years.

He says that is what led to the idea of the franchise fees.

Smith says Fort Madison did not want to exceed 1% because the fees will simply replace the 1% local option sales tax on utility bills.

"Then it has a lower impact on all of those customers, or at least a large majority of the customers," says Smith.

Smith says there will be a few businesses, industries, or organizations that have to pay the franchises fees after being exempt, or partially exempt, from the local option sales tax.

He says the franchise fees could bring in $240,000 annually for the city, which is nearly 3x's as much as the city receives from the county-wide local option sales tax.

If the local option sales tax is no longer collected in Fort Madison, though, the total pool that is shared by participating local governments would be reduced.

Smith says that could cost Lee County about $82,000 annually.

Smith presented the proposal to the Board of Supervisors this week to make sure members know what is under consideration.  The panel did not take action or discuss the possible loss.