SHELDON—A contingent of residents expressed their displeasure over the city of Sheldon’s proposed franchise agreements/fees with MidAmerican Energy Co. at the Wednesday, Aug. 7, city council meeting.
During the public hearing portions of the meeting, frustrated Sheldon residents questioned the necessity of the agreement with the utility as well as the purpose of creating yet another tax in the city.
Sheldon taxpayers already have seen an uptick in taxable valuation this fiscal year.
“I oppose the franchise fee; I’m going to oppose anything that gives the council any more money to spend, frankly,” said resident Terry Braaksma.
“I don’t think you’ve done a good job. Until we get a tax reduction, I will make every possible effort I can to stop additional funding for the city.”
Franchise fees serve as a revenue source for cities through an agreement reached with a community’s utility provider in which the company attaches an additional line item on a customer’s bill.
Under Sheldon’s proposed ordinances, residents would have to pay a 5 percent fee on their MidAmerican gas and electric bills. Nonresidential customers would pay a 2 percent fee and city accounts as well as public and private schools including Northwest Iowa Community College are excluded.
At a 5 percent rate, a person with a $100 electric bill would pay an additional $5 on their bill. Estimates from MidAmerican — based on 2018 billing — show the city could collect $355,000 annually with a franchise fee set at 5 percent for residential customers and 2 percent for nonresidential customers.
Approximately 37.5 percent of those funds would be used to replace the city’s local option sales tax while the remaining amount would be used to support the city’s emergency services.
Those funds can be used for equipment or for the construction, reconstruction or repair of public grounds associated with public safety.
Sheldon resident Marv Van Riesen, who has been a leading voice against the franchise agreement, questioned how the funds would be used. He argued that a future council could change the purpose of the revenue purpose agreement and use the fee money for other reasons.
“We are getting nothing from MidAmerican. Nothing,” Van Riesen said. “We give them the right to come on our property anytime they want and we’ve been operating for years without a franchise. Why do that now? The only reason you want it is for the money. That’s what it’s all about here.”
City manager Sam Kooiker defended the proposals.
He noted Sheldon has financial issues, something he has been working to remedy since coming on board in December, and pointed out some recent changes and cuts the city has made.
“Sheldon is the only community in MidAmerican territory to not have a franchise and there are benefits,” Kooiker said. “Along with the indemnification — formalizing our right of way agreement — yes, a handshake agreement has worked for 32 years but the reality is under Iowa law, franchise is the only recognized way to have an agreement.”
Kooiker also noted that MidAmerican had purchased the former Thermo Cel building, which is adjacent to its property and a structure the council considered the most dangerous in Sheldon, and will dispose of it at no direct cost to the city. However, he added that MidAmerican did not want the situation to be viewed as quid pro quo for entering a franchise agreement.
The city manager said a franchise fee could cover the next 15 years of vehicle, general equipment and discretionary expenses — which comes out to about $6.1 million — for all four Sheldon emergency service agencies.
Kooiker also commended the council for putting franchise agreement/fee up to a public vote on Nov. 5. He noted the council, if it chooses, could enter into a franchise agreement with MidAmerican without the fee stipulation.
He closed out by citing that fellow N’West Iowa communities Hull and Rock Valley have had franchise agreements/fees in place for a long time, noting the practice is not that unusual.
“Tell me what kind of value Hull got for signing a franchise that we don’t have,” Braaksma said. “You talk about benefits of a franchise, tell me some benefits. Tell me one positive benefit the population that uses MidAmerican gets from having a franchise.”
Kooiker said Hull got a swimming pool, which Braaksma noted was paid for by the franchise fee and not directly from MidAmerican. He again asked what benefit Sheldon gets from entering an agreement with MidAmerican.
“The average people aren’t getting any benefit out of a franchise,” Braaksma said. “I have never seen any board in their mind give up a bargaining position without getting something. Consequently, I think it’s ridiculous to discuss that.”
After the hearing closed, Kooiker followed up on Braaksma’s question about the benefit.
He said the benefit of the franchise is it would solidify a handshake agreement between the city and MidAmerican and the utility would agree not to increase rates for 10 years. Kooiker also brought up MidAmerican’s plan to remove the Thermo Cel building, which he again emphasized was not a favor for a favor situation.
“They are doing those things without a franchise fee,” Braaksma replied.
“Seems like the handshakes working,” added Lori Anderson, who also expressed her opposition to the franchise agreement during the meeting.
This story has been updated to reflect the correct amount the city would collect based on franchise rates at 5 percent for residential customers and 2 percent for nonresidential customers.