UTILITY FRANCHISE FEES: Taxes in Disguise

Coral Springs Citizens fork over $7,694,830 to the city in Franchise Fees.

Coral Springs: 3rd Draft 05/10/01

If you are like most of the residents in Coral Springs that are presented with their monthly utility bill for telephone service, Cable TV,  Electricity and garbage collection, you go ahead and pay it. Of course you read through it, and you notice nothing unusual.  Until now. Now, after reading this article you are about to be educated. You are about to find out that the City of Coral Springs is charging you additional funds that they call Franchise Fees . Franchise Fees are another way of the City to collect revenue without calling them taxes. They are Taxes in Disguise.

The City under the law has the right to charge fees to the utility companies for the use of its streets and right of ways, and as the right to do business in this city. ( In the case of Bellsouth the Franchise Fee is 1%.)   They come to an agreement on what the utility should pay, and then they go ahead and allow the utility to collect it from us.  This fee appears on your bill. The  Franchise Fees  make up close to 12.2% of the City of Coral Springs General Revenue Fund and is quite substantial  approaching over $7,500,000. They go to support the services that the city offers.

In the City's report entitled "Fiscal Year 2001 Annual Budget Report" on page 253 they state the definition for a Franchise Fee:

Franchise Fee: Charges to utilities for exclusive/non-exclusive rights to operate within municipal boundaries. Examples are electricity, telephone, cable television, and solid waste.

The 'Charges to Utilities' portion of the definition indicates that it is supposed to come from the utility not you. It says nothing about the charges to its citizens for the use of the services. Examine your utility bill and compare it to the examples that are provided in this article.   The Utility is really not paying this fee, instead you are. If it was truly a Franchise Fee to be charged to the Utility, it would have not appeared on your bill. Instead it would have been a line item in the Utilities Financial Statement as an expense. What really happens is the City allows the utility company  to pass it on to you and collect it on their behalf. The burden for its payment is on you. Just like a tax.  In fact you might as well make out the payment directly to the city. It is coming from you anyway and going to them anyway.

It is good to see that Bellsouth also agrees that a Franchise Fee is a Tax.  Looking at the bill from Bellsouth,   Item 15 is the tax that city gets from us and Item 16 is the Franchise Fee. It is under the heading "Taxes".

In the case of FPL and Bellsouth, both have a Utility Tax and a Franchise Fee associated with their bills, 2 places where the city collects money from you. Maybe the City feels that breaking up the revenue makes it all the easier to swallow. It comes down to from which of your pockets is the city going to take your money from? The right or the left?

Waste Management collects our garbage. They have the exclusivity to our garbage and for that right they agree to pay the city 18% of all the revenue that they collect from us. Included in the quarterly billing shown as shown here is a charge of $44.19 for Solid Waste Collection for a single household. $6.74 of this goes to the city as a Franchise Fee. Even though it is not explicitly shown in the bill, Waste Management not only collects our garbage, but they collect our money also and forwards 18% of it to the city.

Perhaps, if you speak to the City Commissioners or the City Manager they will tell you that Coral Springs is not unique in this effort at 'Money Grabbing'. In fact other cities do the same. Increasing taxes is not a popular item.  Decreasing them is popular and makes the Commissioners and City Manager look good. The best way to decrease taxes without reducing the operating budget is to provide an alternative source of revenue, called  a Franchise Fee. Since it is not technically a 'Tax', there are less restrictions according to State Statute and no reason to ask your permission to use it.

The City will also argue that they need these sources of revenue in order to meet their budgets and continue to provide services to the Citizens of Coral Springs.   Some citizens will agree with them saying that they are happy with the level of service that our city government is providing us. However, in our democracy government is by the people and for the people.  Our city should not be finding ways to circumvent its citizens by using a loop hole that turns a tax into a Franchise Fee.  Unlike a tax, the discussions and negotiations are done behind close doors with the Utility and the City. Joe and  Jane Citizen has nothing to do with it, except pay the bills.   

There are numerous places within the city budget to save money and reduce spending without having to impose the Franchise Fee.  However, when you have the ability to obtain additional sources of revenue without having to bring it before the citizens for their approval, reducing spending is not a priority. Review the current city budget (click here) and determine for yourself whether reducing spending is a priority with the City Manager and City Commissioners.  You will find increases almost everywhere including the amount of revenue that they obtain from you.  There is no cutting out the fat in this budget, and certainly no reason to do so when we allow the city to obtain money from its citizens without calling it a Tax. That's because a a Franchises Fee is nothing else but a TAX IN  DISGUISE!

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