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Franchise fees beg tough questions with taxes

Posted on October 1, 2014 by Taber Times

For those of us that might not be well versed in the minutia of municipal revenue sources, it should come as little surprise that the average John Q. Public might not know what a franchise fee is.

And to be fair, anyone that makes a cursory examination of their gas or electrical bills probably doesn’t have a much better idea.

For the uninitiated (which might be a sizable percentage of the population) franchise fees are what many describe as a “hidden tax,” set by your friendly neighbourhood town council, that are collected by your municipality through your utility providers, Fortis and ATCO Gas.

And when they’re set at the maximum rate allowable by law — like Taber’s at 20 per cent — it isn’t exactly chump change the town is raking in from semi-unsuspecting utility consumers. In 2014, estimated revenues from franchise fees will be dumping nearly $1.4 million into town coffers.

That’s a lot of hard-earned pesos that might stay in your pocket if the Town of Taber had franchise fee rates that were set at percentages closer to the provincial average. According to a survey of franchise fee rates set by 137 municipalities in 2014 and collated by Fortis Alberta, only eight municipalities, including Taber, have rates set at the maximum 20 per cent. By far, the majority of municipalities on the list have rates set between zero and 10 per cent.

So why the huge discrepancy between Taber rates and nearly 130 other municipalities? The answer to that question is in some ways simple, perhaps in others infinitely complex. The simple answer is because the Town of Taber, and your collective representatives on town council, think they can get away with it. And you’ve been letting them get away with it — the town’s franchise fee rates have been set at 20 per cent for the better part of a decade, with hardly a whisper of protest from the greater community at large.

That might be considered tacit acceptance by your municipal representatives and members of the town’s bean counting crew. But when a large percentage of people simply don’t get how they’re being bent over a barrel by the town through their utility bills — that’s not acceptance, it’s just a lack of understanding.

In their defence, the Town of Taber will attempt to befuddle the masses with tales of increased property taxes and the rising cost of municipal spending on wages, programs, recreation, policing, and infrastructure. There is no doubt that some municipalities are increasingly hard pressed to raise revenues in the face of rising costs. But at what point does a municipality seriously consider what it can actually afford to provide for its citizens instead of squeezing them for every dollar they can get? That question — indeed, necessity — is where the setting of franchise fee rates becomes infinitely more complex.

In what amounts to a way to make their 20 per cent more palatable to the larger community, the town is now allocating 7.5 per cent of franchise fee revenue to an energy conservation reserve. And while this commitment should probably be credited as something more than a public relations exercise, it hardly offers the average utility consumer any relief on his own bill. While it is all well and good for the Town of Taber to become a more energy-efficient entity, is it necessary for the Great Unwashed to have to help bankroll these efficiencies through exorbitant franchise fees?

If the town wanted to try a more effective approach with selling these fees to a less than enthusiastic public, they might make doubly sure that all citizens know where these funds are actually allocated. If they went exclusively towards infrastructure — as it seems they are actually supposed to be by definition — more people might have less trouble stomaching taking a municipally-sponsored bath every time they pay their power bill.

In the end, it probably comes down to the admittedly nebulous concept of what is right and what is wrong. If the town needs to raise more revenue, then do it the hard way, by raising property taxes or asking the hard questions about what is essential and what is dispensable. Don’t continue to make end runs around those questions by skimming dollars out people’s pockets through their utility bills. That’s the easy way out. And unfortunately for them, politicians aren’t elected to make the easy decisions — they’re elected to make the hard ones.

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