Local governments know Iowans are angry about property taxes and think there is a chance legislators will rein in city and county taxing authority.
Instead of looking to reduce spending and become more efficient, some local elected officials are just trying to find more creative ways to raise your taxes. Franchise fees on utility bills have become a hot topic in many Iowa communities. But what exactly are franchise fees, and why are they being raised?
What Are Franchise Fees?
Franchise fees have existed in Iowa for decades. They allow cities to charge utilities a fee, which is then passed on to consumers. Originally, these fees were meant to cover right-of-way maintenance—such as fixing sidewalks after utility work. However, in 2009, the law changed to allow cities to use franchise fees for a variety of purposes, including funding police, fire departments, infrastructure, and even economic development projects.
Why Are Cities Increasing Franchise Fees?
Many cities have been spending beyond their means and are now looking for additional revenue streams. With potential property tax reforms on the horizon, franchise fees have become an attractive option. Some cities are proposing increases from 1% to as much as 5%—the statutory maximum.
Cities justify these increases by claiming they need more funding for essential services, such as hiring additional police officers or firefighters. However, in reality, these increases often go toward luxury spending rather than core services like roads and emergency response.
How Do These Fees Impact You?
If your city levies a franchise fee, you’ll see an extra charge on your utility bill. Unlike traditional property taxes, which government entities and nonprofits can sometimes avoid, franchise fees apply to everyone—including schools, food banks, and other nonprofits.
What Can Taxpayers Do?
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Act Quickly and Stay Informed
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The city council can waive the required election for a franchise fee unless taxpayers submit a valid petition.
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Monitor public hearing notices and attend meetings to stay aware of proposed franchise fee changes.
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Submit a Valid Petition
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A petition must be signed by at least 10% of voters from the last city election. Contact the county auditor to determine the exact number of signatures needed and the deadline for submission.
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Know the Election Process
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If the council calls for an election, it must occur during a general election in November. If taxpayers force a vote through a petition, the election will be scheduled for March or September.
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If you live in Burlington, get out and vote next Tuesday, March 4. A 3% gas and electric Franchise Fee is on the ballot.
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Legislative Action
A bill, SSB 1181, has been introduced by Senator Scott Webster that would eliminate a city or county’s ability to impose a franchise fee. ITR has registered in favor of this bill.
Final Thoughts
Franchise fee increases are being proposed at a time when cities increased their spending 6.6% and counties increased 7.6%. While these fees further fund city services, they also impact the bottom lines of families, businesses, and even non-profit organizations.
Increasing franchise fees should not be the first solution when addressing budget shortfalls. Funding essential services is important and local governments must ensure that spending is prioritized effectively.
