By Trevor Busch
Town of Vauxhall council has agreed to maintain the community’s FortisAlberta franchise fee rates at two per cent for 2016.
Franchise fees, annually set and received by municipalities but collected from a consumer’s power and other utility bills (depending on the municipality’s relationship with various utility providers) are nominally to be used for infrastructure improvement and maintenance, but can be allocated at the discretion of the municipally-elected body, and are often referred to as a “hidden tax” by critics.
“We’re brave enough that we can take the heat for having to tax directly, rather than slipping in a back-door tax with Fortis,” said Coun. Richard Phillips, speaking at the Sept. 21 meeting. “The math is pretty simple. Do we want to tax them ourselves, or do we want to pretend it’s Fortis that’s the bad guy?”
The Town of Vauxhall’s two per cent rate for 2016 is expected to raise approximately $10,000 for the municipality.
“Has it been beneficial for us?” Mayor Margaret Plumtree questioned rhetorically. “But any money is beneficial.”
The franchise fee is calculated as a percentage of the distribution tariff (delivery charges) rather than retail charges or other riders. The fee can be adjusted annually up to a maximum of 20 per cent capped by the province’s energy regulator.
“I think our philosophy was that everybody pays then,” said Coun. Martin Kondor, explaining council’s reasoning for making the increase to the present rate in 2015. “When you tax, only certain people pay, because not everybody pays tax. That’s the only way you can get money out of them, that’s how we went about it. But you’re still taxing — it’s a tax.”
If a percentage reduction were to be approved by town council in future, this could force the town to off-set any loss in current revenue through reduced town expenditures or increased property taxes.
Phillips cautioned council to remember that franchise fees could be considered an undue burden for some organizations, especially considering the fee is effectively taxing tax-exempt organizations in the municipality.
“But there’s very few things in town — you’re hitting churches this way, government buildings, schools.”
Vauxhall’s sister municipality, the Town of Taber, is one of a handful of Alberta communities currently charging the maximum-allowable rate of 20 per cent as a franchise fee through Fortis. In 2014, approximately $1.4 million was contributed to that municipality’s revenues through FortisAlberta and ATCO Gas franchise fees.
Out of a list of 137 communities in 2014, only Blackfalds, Bon Accord, Breton, Calmar, High River, Morinville, Provost, Stony Plain, Thorsby and Vulcan charged a rate of franchise fee of 20 per cent. A majority of communities included on the list only charge franchise fee rates of between zero and 10 per cent.
Across the province, franchise fees have increasingly been criticized as a “hidden tax” by utility consumers, a “tax” which raises revenue for municipalities through charges to a resident’s utility bills and not through their property taxes.
“It just seems like we should be brave enough to levy taxes ourselves, rather than asking Fortis to tax for us,” said Phillips.