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1. What is a franchise fee?

Utility franchise fees are commonly found across Minnesota and the country as a way to fund city operations. Under Minnesota Statute (216B.36), cities can impose a fee on utility companies that use the public rights-of-way to deliver service. These utilities then pass on these charges to utility customers on monthly bills. As fees are collected through monthly customer bills, utilities then return the fees collected back to the city.

The Woodbury Audit and Investment Commission and Woodbury Parks and Natural Resources Commission worked together throughout 2020 to analyze franchise fees and other funding options and develop recommendations for community input and City Council consideration.

Replacement Plan Funding Recommendations Report (PDF)

2. What will the cost impacts to residents and businesses be?

Multiple funding options are under consideration (as detailed in the recommendations report). One of these options (Option 1A) would use a combination of the property tax and franchise fee to allocate approximately $2.9 million annually to address the parks and trails replacement funding shortfall.

The estimated franchise fee impact to Woodbury property owners would be $5 per month (total for gas and electric) for most residential properties. The franchise fee for larger commercial properties will be more, with many variables influencing the final estimate. See below, or reference page 11 in the Replacement Plan Funding Recommendations Report (PDF).

Proposed Monthly Franchise Fees	Option 1A: Blended (Mid End Fee)
Electric Service
Residential	$3.25
Small Commercial/Industrial, Non-demand	$3.50
Small Commercial/Industrial, Demand	$23
Large Commercial/Industrial	$90
Public Street Lighting	$8
Gas Service
Residential	$1.75
Commercial Gas Service - Xcel Energy
Commercial Firm, Non-demand	$10
Commercial Firm, Demand	$100
Small Interruptible	$90
Medium/Large Interruptible	$55
Firm Transportation	N/A
Commercial/Industrial Gas Service - CenterPoint Energy (Estimated)
Commercial A  Less than 1,500 therms/year	$10
Commercial/Industrial B 1,500 less than or less than 5,000 therms/year	$10
Commercial/Industrial C greater than 5,000 therms/year	$100
Small Volume Dual Fuel A less than 120,000 therms/year	$90
Small Volume Dual Fuel B greater than 120,000 therms/year	$90
Large Volume Dual Fuel greater than 1,999 therms peak day	$55

If approved, the collection of the monthly franchise fee through Xcel Energy and CenterPoint Energy utility bills is planned to start in January 2022.

3. What is the estimated financial impact to non-residential properties?

The estimated franchise fee impact to the majority of Woodbury non-residential properties (for Option 1A) would be $10 per month for gas and $3.50 per month for electricity. Larger non-residential utility users may have a higher fee applied.

4. Do other cities collect franchise fees?

Many other cities collect franchise fees. Below is a chart comparing franchise fees between comparable cities (adjacent cities and cities over 40,000 excluding St. Paul and Minneapolis):

5. What are the next steps to implementing a franchise fee?

The City of Woodbury currently has franchise ordinances in the City Code. However, these franchises have expired, and proceeding with the implementation of franchise fees will require these ordinances to be updated and renegotiated with utility providers. The public will be invited to participate in upcoming community outreach and engagement opportunities related to implementing a franchise fee.

In addition, ordinance amendments that result in changes to an established franchise fee take approximately 90 days to implement fully. After such approval, the city would be required to notify the Minnesota Public Utility Commission and then allow time for the utilities to implement into their billing processes.

6. Have more questions?

Questions about the franchise fee should be directed to Parks and Recreation at 651-714-3583 or via email.