Franchise Fees

A public hearing is scheduled for Monday, July 26 at Bloomington City Council to discuss an update to Franchise Fees.  A Franchise Fee Update page has been created on the Let’s Talk Bloomington webpage https://letstalk.bloomingtonmn.gov/franchise.

The City of Bloomington has the responsibility for upkeep of approximately 341 center lane miles of city streets within its boundaries and 43 miles of trails. This includes seasonal maintenance activities such as snow removal, crack sealing, street patching, sweeping, as well as structural maintenance of the street and city owned trail system. The City of Bloomington has made a commitment to its residents to provide a systematic program of street and trail rehabilitation and repair in order to assure that the City streets and trails are serviceable, safe, functional, and provided at a reasonable cost to meet the needs of our residents and the traveling public. The City of Bloomington Pavement Management Program (PMP) strives to expend tax payer funds in a cost-effective manner in order to ensure the most value for residents.

Every mile of Bloomington streets and trails are entered into a computerized program designed to maximize the life of City streets and trails and at the same time to minimize costs by applying the most cost effective maintenance technique to the various roadway and trail surfaces. The computer program develops something called the Pavement Condition Index (PCI) of the pavement. The PCI is a numeric reflection of the structural integrity of the pavement including potholes, cracking, rutting, etc. The PCI assists staff in developing the list of the streets and trails that need maintenance. City staff analyzes the recommended streets and trails and proceeds in a manner that “makes sense” and is within the funding provided. The goal of the program is to “do the right maintenance at the right time.”

Three construction techniques are used as part of the PMP program to maintain city streets: Sealcoat, Mill and Overlay and Reconstruction. Sealcoat involves spraying a bituminous adhesive on the existing surface and topping it with small graded aggregate rock. The excess aggregate is swept off and recycled. City Maintenance Division crews perform this work, which helps protect the pavement from oxidation and the effects of moisture. Mill and Overlay involves grinding off the top layer of surface and installing a new top layer of pavement. This is a structural improvement and extends the life cycle of the original pavement. Reconstruction removes and replaces the existing asphalt pavement and aggregate base and installs curb and gutter if not already present. The City hires an outside contractor to perform both the overlay and reconstruction projects. 

Another component of the PMP Program involves trail maintenance and reconstruction.  Maintenance of the trails may include crack-sealing, fog-sealing or sealcoating and are done both by the City Maintenance Division along with hiring outside contractors.  Trail reconstruction is also completed as needed and the City hires an outside contractor to perform this work.

The original PMP program was developed by the City in 1991-1992. Implementation of the program began in 1993.  A major aspect of the plan was to have the streets evaluated regularly by staff and annual street reconstruction projects initiated by the City rather than waiting for petitions or complaints.  Prior to the PMP, reconstruction was taking place by petition, but this process was proving to be very controversial, and actual reconstruction of streets occurred infrequently. Almost one-third of the City’s streets at that time did not have curb and gutter, adequate drainage, or appropriate strengths, and were labeled “substandard.” The entire cost of the reconstruction was assessed to the abutting property owners; which, in part, explained why they were unpopular. Today, the goal of the program is to keep the number of “problem” streets at 10% or below. 

In 2015 for the Pavement Management Program (PMP,) the City Council amended the program to include the city trail system comprised of 38 miles (at that time) of City ROW and Park trails.

While not a “tax,” this is a dedicated revenue source for the City that is collected from utility companies in Bloomington. It is not levied in the way that a property tax is levied, and franchise fees are not tied to the value of a property. Thus all residential customers of gas and electric services would pay the same amount toward the Pavement Management Program, assuming they have both services.

Franchise fees are a method of collecting funds from utility companies who use City rights of way. These funds are typically passed directly through to all commercial and industrial businesses, tax exempt properties, and residents that use the street and trail systems.

The franchise fees are set aside in a dedicated fund and are used solely for PMP overlay, sealcoat, and trail expenses.  City staff is also looking into adding sidewalk replacement into the program to aid in improving sidewalk condition to current City standards and ADA compliance. 

Minnesota State Statutes allow for a city to impose a fee on a utility company for its use of publicly owned right-of-way (MN Statute 216.36). Many cities through-out the state have adopted franchise fee ordinances. Within Hennepin County, 86% of the population pay franchise fees to the utility companies that are passed through to the specific cities. The majority of these cities utilize this revenue source for their related Pavement Management Programs.

Since spring 2016, residents have been charged $3.75 on their electric bill and $3.75 on their gas bill every month. City Council is looking at options for items to be included in the Franchise Fee program and considering an increase of up to $0.85 to begin in January 2022.  The proposed increase will result in a charge of $4.60 on their electric bill and $4.60 on their gas bill every month.

Commercial/Industrial properties are charged based on the below schedule. The property classification is determined by the respective utility company.

Electric:

• Small Commercial/Industrial - Non Demand $9.20
• Small Commercial/Industrial - Demand $49.00
• Large Commercial/Industrial - $141.00

Gas:

• Commercial, Small Volume A - $9.20
• Commercial/Industrial, Small Volume B - $9.20
• Commercial/Industrial, Small Volume C - $49.00
• Commercial/Industrial, Small Volume Duel Fuel A and B - $49.00
• Commercial/Industrial, Large Volume Duel Fuel - $141.00

The noted rates have been developed to generate $6,150,000 annually for each of the next two years.

Yes, the fees are charged by electric and gas utility accounts and you will pay the standard residential fee. It may be that the fee is incorporated into your rent if you do not pay your electric and gas bills directly to the utility company. The fee pays for your use and maintenance of the public City roadways and trails.  City staff is also looking into adding sidewalk replacement into the program to aid in improving sidewalk condition to current City standards and ADA compliance. 

The franchise fee is an account-based fee on each premise and not a meter-based fee. If you have multiple meters on the same bill, you will be charged only for the largest meter. If you have specific questions on your bill and/or meters, you will need to contact the utility company directly.

The City has kept the same rate for the past six years. The City will review the rate every two years in the future.

State law does not allow the City to charge a direct fee for maintenance of our system (e.g., a street utility fee). State law does allow for the collection of a franchise fee from utility service providers for their use of the right-of-way. Thus the fee will be charged to the utility companies and then dedicated to maintain the City roadways and trail systems.  City staff is also looking into adding sidewalk replacement into the program to aid in improving sidewalk condition to current City standards and ADA compliance.