franchise fees demystified

TLDR: Every red cent of franchise fees is paid by YOU, the end user.

Right at the end of the “public” Citizens’ Budget Committee meeting Monday night, May 1, City Manager Joe Lessard gave an extended explanation of franchise fees.

graph from the 2021-2023 adopted budget, p. 33

He did a good job of explaining the rationale for charging franchise fees.  He adequately explained how the utility providers are charged by the city.  But he stopped there, insisting that those utilities ultimately pay those fees. He gave the impression that the fees are paid by large corporations themselves. He did verify that the franchise fees apply to the city utilities as well. When you listen to his explanation, you will hear him state that the “rate payers” should pay for the use of the city right of way. But he realized his mistake, and twisted himself into a knot trying to shift the cost onto the utilities, rather than the “rate payers”. The rate payers, of course, are the end users, not the suppliers. That might be considered a Freudian slip by some.

Rather than bore you with a transcription of his rambling and inaccurate explanation, you can listen for yourself when the video of the meeting is released later this week. His comments start at about 1:37:58 of the recording.

If you were feeling charitable, you might think that he just hadn’t ever completely thought it through.  If you were a little less charitable, you might think he just doesn’t know better, or you might call it a lie of omission.  Either way, he neglected to mention the crucial, final step in the life of a franchise fee.

What he didn’t even mention is that those fees are ultimately paid by the utility user: the taxpayer.

Look at your Avista or Spectrum bill.  You can’t miss it.

a typical Ashland Avista bill
a typical Ashland Spectrum bill

You can call Avista or Spectrum to verify that the franchise fee is a “pass-through” fee. The city bills them, they bill you, they collect the fee, and they pay it to the city.

If anyone tells you otherwise, they either don’t know, or are attempting to deceive you.

When you look at your city utility bill, it’s there even though you don’t see it.  The city enterprise funds (utilities) are required to charge the users for their costs, every penny.  Those franchise fees are a cost to the utilities.  They are factored into the rate structure of the following utilities:

a typical Ashland utility bill
  1. Electric
  2. Water
  3. Sewer
  4. AFN (or other ISP if billed separately)

The only rates that don’t have franchise fees buried within them are:

  1. Street User Fee
  2. Storm Drain

What about those other fees?

  1. The water customer charge
  2. Electric users tax (paid into the general fund)
  3. AFR
  4. Public safety support fee (for police)

They’re just extra taxes that the council decided to put on the utility users.  They can do that as often and as much as they desire.

And they will continue to do so in order to pay for the massive infrastructure programs that are slated for the next few years.

from OpenGov on May 2, 2023
from OpenGov on May 2, 2023

As you can plainly see, the vast majority of franchise fees are charged to our Ashland city owned utilities and ultimately paid by every utility user in the city, in other words, every resident and taxpayer.

Why is the city manager misleading the public and the council (who should know better) about the nature of the franchise fees?  He is creating the impression that he is attempting to sway the voters about 15-214, even though he is prohibited from expressing support for either side of a ballot measure.  Of course, that’s open to interpretation, and no one can know what’s in his mind.

One thing is clear, however.  With his interpretation of the allowable uses of the food and beverage tax, he is straying into the realm of policy making, which is the exclusive purview of the City Council.

His interpretations, along with his less than accurate comments regarding the effects of measure 15-214, are the reason that there is so much confusion in the public regarding this measure. This should be an item of grave concern for both the council and the taxpayers.

Remember that this measure was rushed through council and placed before the voters in a special election.  The proponents know that turnout for off year special elections is usually quite low.  They are clearly hoping that many people just won’t bother to vote.  Please don’t let their cynical view of the democratic process succeed.

Learn the facts before you vote. 

Decide for yourself.  And then please vote.