City scraps utility fee increase

City officials determine change isn't legal

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Craig resident Bob Shelton was right. The Craig City Council's attempt to bring utility fees inline with the current economy was a tax increase.

Shelton attended the Sept. 13 City Council meeting to protest and ordinance that would have raised the fee the city charges natural gas, telephone and electric companies to 3 percent of their 2005 revenues. The current fee is 3 percent of a company's 1985 revenues.

Shelton said that, because companies would pass the increase on to their customers, the ordinance was akin to a tax increase.

City Council members then argued that they had no control over whether utility companies dipped into their profits to pay the difference or passed it onto customers.

They since have discovered the fee is considered "an occupational tax," and bec--ause the 1992 Taxpayers Bill of Rights prohibits any tax increases without voter approval, increasing the fee by ordinance is illegal.

The council was set to pass the ordinance on its second reading when a utility company representative protested its legality.

Yampa Valley Electric Assoc--iation President Larry Covillo didn't argue the council's ability to increase the rate, but he said that it could not set a fee at a revolving rate.

In researching the legalities, city attorney Kenneth Wohl found out that the fee was considered and occupational tax.

Cities originally started charging utility companies a "franchise fee," which was considered a payment for use of city-owned easements. In 1985, the law was changed to prohibit franchise fees, so cities implemented utility taxes. That's the reason Finance Director Bruce Nelson thinks the ordinance used 1985 rates as a baseline.

Using current revenues, Nel--son predicts a change would have increased city revenue by $148,000, bringing the total from the utility fee to $360,000.

City staff members are re----searching alternative ways to increase revenue to meet rising costs.

Councilor Joe Herod said as costs go up, the city needs to find ways to maintain -- even increase -- revenues. The other option, he said, is to cut services.

Christina M. Currie can be reached at 824-7031, ext. 210, or ccurrie@craigdailypress.com.

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