City of Lawrence
Finance Department
MEMORANDUM
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TO: |
Mike Wildgen, City Manager Debbie Van Saun, Assistant City Manager |
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FROM: |
Casey Liebst, Management Analyst Finance Department |
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DATE: |
6/25/04 |
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CC: |
David Corliss, Assistant City Manager |
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RE: |
Water, Wastewater, Stormwater “Franchise Fee” |
The following information is in response to the discussion at the budget study session on June 9, 2004 of the concept of using a “franchise fee” model for the Water, Wastewater, and Stormwater utilities.
The “Franchise Fee” Model
Pursuant to K.S.A. 12-2001 et seq. and K.S.A. 12-2006 et seq., the City grants the right, privilege and franchise to construct, maintain, extend and operate a utility in, through and along City right-of-way. The City is able to collect a fee for this privilege from each provider of cable and cable information services, electricity, natural gas, and telephone.
Franchise fee are contractually established and vary according to the utility provided and/or utility provider. The following table shows the current fee structure for all franchise fees collected by the City.
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UTILITY |
PROVIDER |
FEE |
AMOUNT COLLECTED IN 2003 |
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Cable
Cable Information Systems |
World Company |
three and one-quarter percent (3.25%) of Gross Revenues derived from the operation Grantee’s Cable System
two percent (2%) of Gross Revenue derived from the operation of Grantee’s Cable System |
$528,497.25 |
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Electricity |
Western Resources and Kaw Valley Electric Cooperative |
four percent (4%) of the total gross receipts from the sale of electrical energy during the term of this franchise to all consumers within the corporate limits of the City |
2,100,730.67 |
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Natural Gas |
Kansas Public Service (Aquila) |
an amount equal to a fee schedule which is applicable to volumes of natural gas which the Company sells, distributes or transports to a customer’s receipt point
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848,695.58
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Greeley Gas Company |
five percent (5%) per annum of the gross receipts of said gas plant for gas sold during the term of this franchise to all consumers served by Greeley within the City |
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Telephone |
Southwestern Bell Telephone and Worldnet |
two percent (2%) of “gross revenue from local exchange telecommunications service,” rendered wholly within the corporate limits of the City |
182,564.56 |
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TOTAL FRANCHISE FEE RECEIPTS |
$3,660,488.06 |
Applying the Model to the Water, Wastewater, and Stormwater Utilities
Following the “franchise fee” model, each of the utilities provided by the City (water, wastewater, stormwater), would contribute a percentage of their gross receipts to support the general operation of the City.
The Water and Wastewater Fund as well as the Stormwater Utility Fund are already contributing a percentage of their receipts in the way of transfers to the general fund as well as by waiving fees and charges for services provided to other City departments.
Transfers
The table below shows the transfers to the General Fund from the Water and Wastewater Fund and the Stormwater Utility Fund. The table also shows the transfer as a percentage of the charges for water and sewer that are billed to customers. A second percentage is provided that includes all other fees (tap fees, sewer inspection fees, system development charges, etc.) collected in the fund in 2003.
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FUND |
AMOUNT OF TRANSFER TO GENERAL FUND |
TRANSFER AS PERCENT OF BILLED CHARGES |
TRANSFER AS PERCENT OF ALL CHARGES |
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Water and Wastewater |
$1,010,500 |
4.82% |
4.45% |
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Stormwater Utility Fund |
$40,000 |
1.52% |
1.52%* |
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*In 2003, no other fees were collected in the Stormwater Utility Fund |
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Waived Charges and Fees
In addition to a monetary transfer, the Water and Wastewater Fund waive many of the charges and fees for services provided to other City Departments.
Water and Sewer Charges and Fees. Currently, the City does not collect revenue from any City department for water and sewer usage. Attached is a set of tables detailing the City’s water consumption and an estimate of what the Water and Wastewater Fund could have charged for that consumption. Each table is subtotaled by department where possible. Not all accounts can be attributed to a single department and are listed as “City” accounts. Those accounts labeled “no address” were not identifiable by an address and therefore not attributable to a particular department. A summary is provided below.
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DEPARTMENT |
WATER CONSUMPTION (GALLONS) |
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ESTIMATED WATER CHARGES |
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ESTIMATED WASTEWATER CHARGES |
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TOTAL |
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City |
10,196,500 |
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21,164.23 |
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52,114.44 |
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73,278.67 |
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Fire |
1,836,900 |
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4,240.22 |
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7,456.68 |
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11,696.90 |
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Parks and Rec |
81,576,000 |
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156,574.03 |
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71,523.33 |
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228,097.36 |
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PD |
106,700 |
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311.72 |
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474.18 |
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785.90 |
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Public Works |
1,474,400 |
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3,580.18 |
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7,159.12 |
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10,739.30 |
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Utilities |
9,541,400 |
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17,894.07 |
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53,501.16 |
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71,395.23 |
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No address |
2,772,300 |
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6,386.55 |
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14,855.61 |
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21,242.16 |
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TOTAL |
108,004,300 |
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$211,428.79 |
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$207,084.52 |
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$417,235.52 |
The estimated total charges for 2003, based on City water and wastewater consumption, would have been $417,235.52, or an additional 2% of the total of charges billed by the Water and Wastewater Fund in 2003.
The Water and Wastewater Fund also waives other charges and fees for services provided to other City departments. In 2003, for example, more than $25,000 in water system development charges (.12%) for Public Works and Parks and Recreation projects were waived.
Stormwater Charges and Fees. The Stormwater Utility Fund does not waive charges or fees for City accounts. In 2003, City departments paid $93,094.68 in stormwater charges to the Stormwater Utility Fund.
Conclusion
Considering the transfer to the General Fund from the Water and Wastewater Fund and the Stormwater Utility Fund, as well as the fees and charges waived for water and sewer consumption, City owned utilities are effectively paying a franchise fee. In 2003, the Stormwater Utility Fund made a transfer to the general fund of 1.52% of the total stormwater charges collected. The Water and Wastewater Fund transferred 4.82% of the water and sewer charges collected in 2003 to the general fund, and waived an additional $442,235.52, or 2.11%, in other charges and fees. This percentage (6.94% total) is much higher than the franchise fees paid by other utility providers in the City.