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Franchise Fees
In 2016 Bloomington implemented franchise fees to expand its Pavement Management Program (PMP).
PMP maximizes efficiency in street repair and replacement by identifying the right action to take at the right time. This prolongs pavement life, keeps City infrastructure in good condition and supports property values.
PMP funding is provided through state aids, assessments, levy taxes and, now, franchise fees. With franchise fees, existing trails are maintained, street overlay maintenance is fully funded, and the sealcoat program is partially funded.
Overlay/sealcoat
There are two street maintenance techniques in the Pavement Management Program (PMP) that utilize Franchise Fee dollars: Mill/overlay and sealcoat techniques.
Mill and overlay projects grind down the top layer of pavement surface and install a new top layer. This is performed when pavement is in moderate condition and extends the life cycle. Additionally, curbs, gutters or sidewalks causing drainage issues or public hazards are replaced.
Sealcoat sprays adhesive on existing surfaces and spreads small aggregate rock over the top. (Excess rock is swept off and recycled) This extends pavement life by protecting it from oxidation and moisture.
Approximately 7-9 miles of mill/overlay and 25-30 miles of sealcoat are typically done each year to maintain Bloomington City streets.
Trails
By adding a trail component to PMP, trail segments are evaluated for Pavement Condition Index (PCI) values and scheduled for improvements based on their score. Trails are then surveyed and designed to meet modern standards, including, geometric improvements, additional width, safety buffers and ADA (Americans with Disabilities Act) compliance.
Franchise Fees are also used for routine maintenance of existing Right of Way and Park Trails. Current maintenance practices include crack sealing, fog sealing and patching for severe pavement defects.
Maintenance on trails prevents detrimental effects of UV rays and oxidation. Maintenance on roadways prevents detriments due to vehicle loading.
Approximately 3-4 miles of maintenance are completed each year on City trails.
Franchise fee work completed since 2016
What is Pavement Management Program (PMP)?
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, along with hiring outside contractors, 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.
How long has the Pavement Management Program been in place?
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) and currently 43 miles of City ROW and Park trails.
Are franchise fees just another tax?
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.
What are the franchise fee funds be used for?
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.
What is the City's authority to charge a franchise fee?
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. Most of these cities utilize this revenue source for their related Pavement Management Programs.
How much will I be charged?
Since January 2022, residents have been charged $4.60 on their electric bill and $4.60 on their gas bill every month.
In May 2023, City Council approved an increase of $1.35 to begin in January 2024. The increase will result in a monthly charge of $5.95 on residents' electric bill and $5.95 on the gas bill.
The approved 2024 rates for commercial/industrial properties are on the schedule below. The property classification is determined by the respective utility company.
Electric:
- Small Commercial/Industrial - Non Demand $11.90
- Small Commercial/Industrial - Demand $63.00
- Large Commercial/Industrial - $182.00
Gas:
- Commercial, Small Volume A - $11.90
- Commercial/Industrial, Small Volume B - $11.90
- Commercial/Industrial, Small Volume C - $63.00
- Commercial/Industrial, Small Volume Duel Fuel A and B - $63.00
- Commercial/Industrial, Large Volume Duel Fuel - $182.00
The approved rates are expected to generate $7,951,000 annually for each of the next two years.
I live in an apartment or townhome. Will I be charged a franchise fee?
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.
I have multiple bills or two or more meters on my property. Do I have to pay the fee more than once?
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.
How often will the City review the franchise fee for consideration of changing the fee?
The City kept the same rate for the first six years and updated rates for the first time in 2022. The City will review the rate every two years in the future.
Why doesn't the City charge a fee to each property for street maintenance? Why go through a third party for collection?
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.