Utility fee ordinance tabled

City officials research whether change is legal

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Craig City Council's first attempt at raising fees charged to utility providers was scrapped after hearing it may be illegal.

But the idea isn't dead.

The City Council was set to hear -- and likely pass -- the second reading of an ordinance that raises utility fees until a call came from Yampa Valley Electric Company General Manager Larry Covillo questioning its legality.

Covillo said he doesn't think the city can enact an ordinance that sets fee structure that fluctuates from year to year.

The ordinance updates the fees charged to natural gas, telephone and electric companies. Currently, the fee is 3 percent of a company's 1985 revenues. The proposed ordinance would base the fee on 3 percent of a companies revenues for the current year.

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 a utility tax. That's the reason Finance Director Bruce Nelson thinks the ordinance used 1985 rates as a baseline.

City Manager Jim Ferree thinks that councilors wanted to protect the city's revenue at a time when the economy was on the decline, and that they didn't want fluctuating utility company revenues to negatively affect the budget.

City Attorney Kenneth Wohl is looking into the legality of passing an ordinance that bases a fee at a rate that changes from year-to-year.

That doesn't mean the City Council couldn't assess utilities on the previous year's gross revenues, but the council would have to pass an ordinance each year that states the exact year the tax would be based on. Nelson recommended the city review the ordinance at least once every five years.

The city could look at past utility revenues and set the rate at a year when utility companies had high revenues.

Using current revenues, Nel--son predicts a change will increase city revenue by $148,000, bringing the city's total to $360,000.

Mayor Don Jones said what the city collects should be based on current economic conditions.

"That's the biggest point," he said. "Since 1985, the cost of things has not went down."

Nelson said utility companies generally pass the fee onto customers.

Craig resident Bob Shelton opposes any change that would mean an increase for residents.

"It seems to me this isn't the way to get taxes," he said. "You're not getting money from utility companies, you're getting it from taxpayers."

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.

He said the city sets the fee, but it is a utility company's decision whether to pass that on to customers.

"I would dispute that the City Council is responsible for the decisions utility companies make," Councilor Terry Carwile said.

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

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