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Franchise fee could hit UI

BY JOHN DOETKOTT | DECEMBER 07, 2009 7:30 AM

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A proposed city utility fee increase could put even more of a strain on the UI as it works to cut millions from its budget.

Officials estimate the proposed 2 percent franchise fee would cost the UI around $350,000 a year, accounting for nearly a quarter of the roughly $1.5 million the city believes it would bring in annually.

The Iowa City City Council is set to vote on the proposed fee on gas and electricity from MidAmerican Energy at a meeting tonight after deferring the vote last week. Representatives from MidAmerican Energy, the largest investor-owned utility company in Iowa, have said they will simply pass the fee along to its customers, including the UI.

City Manager Dale Helling said the franchise fee would bring in about $745,000 annually for every 1 percent in franchise fee imposed. There is a possibility the council will lower the percent to a lesser amount.

The money generated from the fee will be used for a public safety initiative to hire six additional police officers and nine firefighters.

Several city councilors have said the city is in dire need for the extra personnel, and on Nov. 17, the council approved the 2 percent fee’s second reading by a vote of 5-1. But the council postponed its final decision at last week’s meeting, moving it to 6:15 p.m. today after its work session.

Some are questioning putting even more of a burden on the UI at a time when it’s facing unprecedented levels of cuts.

Regent Robert Downer said the prospect of the UI aiding Iowa City public safety seems redundant and expressed concern that having a state institution paying this sort of fee might not be entirely legal.

“I have some serious doubts about being able to assess this to the university,” he said, and the UI is already supporting public safety in yearly tax payments for its estimated share.

Downer also questioned whether having the university help pay for public safety while also providing UI officers as additional downtown law enforcement could be a “duplication.”

It is unclear whether the cost increase could lead to higher student fees.

Glen Mowery, the director of UI Facilities Management’s utilities and energy management, said the university gets about two-thirds of its energy from MidAmerican Energy, with the other third coming from the UI Power Plant.

The plant uses a combination of coal, natural gas, and a biomass program that includes the burning of oat hulls. The oat hulls are a byproduct of the cereal made at the Quaker Oats plant in Cedar Rapids and are used as a cheap and environmentally friendly alternative to coal.

UI Senior Vice President for Finance Doug True said a bulk of the energy used to heat and cool university buildings is generated by university facilities.

Councilor Connie Champion was the only dissenting vote at the fee’s second reading. She cited the effect on local businesses as the reason she opposes the fee.

Champion said she wants to protect those businesses after hearing from several owners who said the fee could force them to close or move out of town.

“I want to keep what we have here,” Champion said. “I don’t want it going to Mexico or Korea.”

Helling said the franchise fee, which has no proposed end date, is one of the only available long-term funding sources for public safety.


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