Franchise Fee Update Spring 2025

Background

In 2016, the Bloomington City Council implemented the use of Franchise Fees to preserve and expand its Pavement Management Program (PMP). City Council is committed to maintaining a sustainable and consistent funding source for PMP Street Overlays, Seal Coating, Park Trail and Right of Way (ROW) Trail and Sidewalk Construction and Maintenance, which are the components of the PMP Program that franchise fees currently fund. This also includes upgrading trails and sidewalks to be ADA accessible as projects are completed.

What is a Franchise Fee and how is it associated with City right-of-way?

Cities hold right-of-way as an asset in trust for its citizens. In order to properly care for and manage this important public asset, cities adopt ordinances and regulate the use of and access to the right-of-way. Adopting a right-of-way management ordinance gives cities authority to take advantage of management rights granted to cities under state law. One of those right-of-way management rights is allowing the use of franchise fees. Minnesota State Statutes allow for the city to impose a fee on a utility company for its use of publicly owned right-of-way. These funds are collected from all commercial and industrial businesses, tax exempt properties and residents in Bloomington and are used to fund the street and trail systems.

What have Franchise Fees been used for since implementation in 2016?

Refer to the maps below that show the street sealcoats, overlays and trail/sidewalk reconstruction that have been completed since 2016, utilizing franchise fee revenue to cost effectively keep the city’s infrastructure in good working condition as part of the PMP program.

Three images follow. They are jpeg files and not ADA accessible. Click images to enlarge as a PDF.

Picture of map of 2016-2024 sealcoat street segments.

Picture of map showing Right of Way trails and sidewalks in blue and Parks trails and sidewalks in red.

Picture of map with 2016-2024 Overlay street segments.

Current Status

When Bloomington City Council initiated the collection of these fees in early 2016 it was anticipated that an increase in fees would occur in 2020 to be implemented in January 1, 2021 and would be reviewed every two years starting in 2020. Due to the financial impact of COVID 19 a one-year delay was imposed. City Council approved a rate increase in July 2021. This rate increase was implemented on January 1, 2022, and was the first rate increase since the program began. The City reviews the rate every two years and an additional rate increase was implemented on January 1, 2024. City staff is currently reviewing the funding rates and project needs and will be bringing forward to City Council for approval. This also includes the possibility of adding a retaining wall and sustainability component to Franchise Fee funding.

Retaining Walls

The City is responsible for the maintenance of all retaining walls within City right of way and routinely maintain or replace walls that reached the end of their useful life. Currently, retaining wall work is funded by the City's General Fund and typically covers small wall repairs and maintenance or is carried over from year to year to fund larger wall replacements. City staff is proposing to supplement the funding received from the general fund with an additional amount allocated from franchise fees to allow the continued replacement of walls that are reaching the end of their usable life and allow the proper maintenance of existing walls.

Retaining walls in Bloomington marked in red. Areas in blue boundaries indicated projected replacement in 2-3 years.

Stone retaining wall.Log retaining wall.

Residential Energy

Did you know that over half of the energy used in Minnesota homes goes towards heating and cooling? Without proper insulation and air sealing homes can be costly to heat and cool. Unfortunately about 90% of Bloomington's single family homes were built before there was an energy code requiring insulation. Data collected from utility energy audits(External link) and the City's Time of Sale Energy Disclosure Program(External link) show over half of Bloomington's homes are under-insulated. Investing in energy efficiency upgrades, such as adding insulation and air sealing is the most cost-effective way to lower residents' monthly energy bills. In addition to lowering bills, air sealing and insulation with proper ventilation can also improve a home's:

• comfort by minimizing drafts
• safety by keeping indoor air temperatures at recommended levels
• air quality by reducing the chance of ice dams and water damage to a home's structure, minimizing the growth of mold

City staff is proposing to provide a residential energy loan program to assist 1-4 unit homes and multifamily buildings to complete energy efficiency projects such as adding insulation to help lower the cost of monthly energy bills.

Business Energy

On average, 30 percent (External link)of the energy used in commercial buildings is wasted due to inefficiencies. This wasted energy leads to higher natural gas and electricity bills. About 2/3 of the energy used in Bloomington goes towards fueling commercial and industrial buildings. By investing in energy efficiency upgrades businesses and organizations can save money, increase building comfort, and reduce environmental impact.

Proposed fee change

The maximum proposed increase would be $0.93 per month for residential properties which would result in a monthly charge of $6.88 on residents’ electric bill and $6.88 on the gas bill. The increase would fund the addition of retaining walls and sustainability efforts to the program.

Next Steps

• April 17, 2025 at 5:00-6:00pm
  • Open House at Rehearsal Hall in Bloomington Civic Plaza
• April 21, 2025
  • City Council study session
• May 19, 2025 at 6:30pm
  • City Council to hold Public Hearing
• May–July 2025
  • 90-day period for utilities and Public Utilities Commission to process the request and prepare for collection of fees
• January 1, 2026
  • New franchise fee rates go into effect