Council made their intention clear to lower the FortisAlberta franchise fee rider from 12.7 per cent to 11.73 per cent effective Jan. 1, 2022.
“If you left that rate the same it would actually be an increase in revenue for the Town and that’s based on a few of the factors that Fortis provides the Town on what their formula is based on,” explained Laura Howarth, Hinton’s interim CAO, during the regular council meeting on Oct. 12.
Maintaining the current rate would increase the revenues by an estimated $110,443, based on growth, development, and current assessment values.
Coun. JoAnn Race felt the fees should remain unchanged to make up for lost revenue due to the recently amended tax penalty bylaw. Race noted that the changes to the tax penalties meant the Town would lose $20,000.
“How do we make that back? Do we do it in taxes, do we do it in decreased services? This is an opportunity to not lose any more money and it would not have a negative impact on the community,” she said.
Other councillors did not agree. Coun. Ryan Maguhn noted the FortisAlberta franchise fee is a less transparent way of charging citizens.
“If we have to find other tax dollars in other places, I’d rather find it through different means than through the Franchise Fee is my preference,” said Mayor Marcel Michaels.
Decreasing the franchise fee will affect the rider fee that FortisAlberta charges to its customers. For every 0.1 per cent decrease to the franchise fee a reduction of $11,348 per year of revenue is estimated, according to administration’s report.
Reducing the rider to 11.73 per cent would result in a $0 increase anticipated in overall revenue for the Town from 2021 to 2022.
“This also gives the next council flexibility to make the final decision. If the next council does determine that 12.7 is the number they need for revenue, then that’s a decision that can still be made. To me, I would like to see this number continue to decline at least until we’re halfway between zero and maximum of twenty,” said Coun. Dewly Nelson, adding he would rather see revenue raised through taxation.
Coun. Albert Ostashek too felt that lowering the Franchise Fee is the more responsible option.
“The discussion around this in the past has revolved around that it is a form of non-transparent taxation, which when you look a little bit deeper into it though, is simply not the case,” said Ostashek.
A franchise fee is a cost to Fortis and they have to pass it on in some way to recover the cost paid to the Town, Ostashek noted.
“The one thing that I do like about this is that because it’s a franchise fee that’s applied onto your bill that you get, it is a user-pay system rather than collecting revenue through taxation. This is why I want to see this come back to the future council, there’s an opportunity for some discussion between now and then,” he added.
Any change in the fees allows the public to provide feedback.
Lowering the fee will be advertised for two weeks and the FortisAlberta Franchise Fee Rider for 2022 report, with public notification feedback, will be brought back to the newly elected group of council before Nov. 1, 2021.
The annual franchise fee that is part of the Electric Distribution Franchise Agreement, is charged to FortisAlberta for allowing them access to municipal lands to construct, maintain, and operate distribution systems.
That fee is recovered by FortisAlberta from their customers, by way of a rider percentage, charged on electric billings of all customers that receive electric service in the municipal service area.
According to administration’s report, the fees collected from Fortis help off-set both operational and construction costs incurred by having the utility located in the rights-of-way and properties.
Operationally, the Development and Infrastructure Services Department coordinates planning for utilities, incurs additional engineering costs, reviews, and prepares crossing agreements, as well as administrative costs. On the construction side, Development and Infrastructure Services incurs additional project management, construction and material costs, and time delays when working around or under FortisAlberta and other utilities. Franchise fee revenues are also used to build reserves, which fund operating and capital projects that support the rights-of-way accessed by Fortis.
The Franchise Agreement allows for exclusive right of franchise for a utility service.
A new revenue calculator was sent by FortisAlberta on Sept. 25 that allows for the estimation of anticipated revenues provided by the local access fee rider.
The fee can be changed annually and is capped at a maximum of 20 per cent.
Masha Scheele, Local Journalism Initiative Reporter, The Hinton Voice