If nothing else, give the Des Moines City Council credit for its moxie and creativity. The announcement last week that officials are considering raising the city’s utility franchise fee, a move that would erase the savings electric and gas consumers are getting after the Iowa Legislature voted in 2001 to phase out the utility tax, has miffed state lawmakers
On its face, it’s easy to view the proposal to increase the franchise fee to 6 percent from 1 percent as an attempt to undo the Legislature’s good work. In response to high heating bills in 2001, lawmakers voted to phase out the state’s 5 percent sales tax on natural gas, propane, heating oil and electricity by Jan. 1, 2006.
But it’s really about options — or the lack thereof. Des Moines officials, faced with an aging infrastructure whose fragility was demonstrated by the sewer collapse at Sixth Avenue and Locust Street, shortages in police and firefighters, and pared-down quality-of-life services, are fresh out of options. City leaders say an increase in the franchise fees would be phased in over two years and would eventually bring in an additional $10.9 million annually. Currently, the fee generates about $2.2 million each year.
An across-the-board property tax hike isn’t a practical alternative for the city. Des Moines has the highest property tax rate in the metro area, putting the city at a competitive disadvantage in attracting new businesses and homeowners. The city’s streetlights have already been dimmed, its libraries have been closed on Sundays and other cuts have been imposed to close budget gaps. However, those efforts haven’t been enough to solve the city’s financial woes.
The proposal may never make it into an ordinance. Senate Majority Leader Stewart Iverson, a Dows Republican, has said legislators may pass a bill next session to limit the ability of cities to increase utility fees. The irony there is that it’s the Legislature in part that has placed Des Moines and other Iowa municipalities in a financial bind by cutting state aid to local governments and failint to fully fund the homestead tax credit, which could potentially deliver another $17.6 million hit to local governments.
The long-term solution, of course, is to look at Greater Des Moines in more regional terms, as one metro area with one government. Until that happens, Des Moines officials at least should catch a break from the Legislature. Increasing the utility fee isn’t a great option, but it’s the least objectionable of the various revenue-generating alternatives available to city officials.