Like a Thief in the Night

Be it a tax or a user fee, whatever you want to call it, Fargo’s Street Lighting Utility Ordinance went into effect January 1.

Fargo City Commissioners approved the proposal Dec. 14 with only a one-vote majority, 3-2. Two citizens spoke at that meeting. The public was largely in the dark about the paradigm change coming their way.

Meanwhile, Gaylord, MN, debated and ultimately defeated a street light fee the same month Fargo was weighing the issue. Bemidji also defeated the issue after contentious debate earlier in 2009.

Basic Internet searches suggest that there was a wave of activity in some regions where city governments sought to implement street light fees, as opposed to business as usual where such costs traditionally were paid out of the general fund. Minnesota and California communities topped that list, most likely because of their dismal budget circumstances.

When Fargo’s commission voted Dec. 14, their information packet supporting the new ordinance and rate structure included details about the three cities in North Dakota with street light fees in place: Bismarck, Mandan and Dickinson (effective 2010). Also included were another 20 Minnesota cities, all of which have street light fees of some sort in place.

However, nary a significant reference of dissent was made in the meeting itself, or in the information shared by city staff of government subdivisions, from those who did not want to charge a new street light fee. Had the opposition been heard, it is unclear if the vote would have remained 3-2 in favor of this new $1.6 million fee passed on to businesses, and residents living in homes or apartments.

Already, just on Tuesday of this week, the first non-incumbent candidate for Fargo City Commission highlighted the street light fee as an issue that had a detrimental effect on ordinary people. This is an issue that may be revisited in the future. Clearly, had that candidate been on the Fargo City Commission in December—or even trumpeting the charge against the new fee system then—the new fee would not likely have gone into place effective January 1 and more than likely on into perpetuity.

Finding Context

There is little doubt that Californians and Minnesotans are facing severe state budget deficits. North Dakota is not in the same situation, however. Preliminary research found spurts of street light user fee activity in other places, also, and again with mixed results.

District of Columbia Mayor Adrian M. Fenty proposed a Street Light User Fee early in 2009 for inclusion in the 2010 budget. Residential customers would have been assessed $4.25 a month or $52 annually; commercial customers $16.75 monthly or $201 annually; and all others at $42 each month or $504 annually. With little consideration built into the proposal addressing disparities in fees to small businesses and individuals, the proposal went down to defeat.

Cornelius, OR., (pop. 11,000) residents go to the polls March 9 to vote on a ballot measure to repeal its four-year old $2.25 monthly “streetlight fee.” The repeal would happen if a 2-cent gas tax is approved by the city council, likely in August. The proposed gas tax would generate $180,000. According to City of Cornelius’ newsletter, The Cornelius Gazette, “with the gas tax in place the streetlight fee becomes duplicative and can be repealed… The gas tax is a more appropriate user charge as it is levied on all drivers who use city streets.”

The Cornelius Gazette further explained that “At the rate of 2-cents per gallon all drivers in the household would have to buy more than 113 gallons of gas each month from a Cornelius gas station in order to pay more than they would save with the elimination of the streetlight fee. Depending on the size of the gas tank that is about seven fill-ups a month. The tax on a 15-gallon fill-up is only 30 cents.”

It will be interesting to see what Cornelius voters do come March 9. That ballot proposal, by the way, was brought forward by the city council there.
Salem, OR, voters defeated the Streetscape Utility Fee back in 2003.

Moreno Valley (Riverside, CA) leaders are regrouping after voters last June defeated 2-1 a proposed “increase” of fees from $23 / $24 yearly to $39 to run 8,500 city street lights. Without the additional income, city officials there are looking at options to address the expected $550,000 annual revenue shortfall. Under consideration: Turn some street lights off temporarily; Reduce hours of operation, shutting lights off at midnight; Cut down on wattage; Invest in new technology (LED or solar powered, for example); A new public vote on the fee increase; and finally, a general fund subsidy to make up the difference.

There was something the citizens did not like, the fee itself, or the increase, we do not know. Regardless of the decision, these leaders are dealing with the vote of the people not to increase street light fees.

Land / Curtis Park voters (Sacramento, CA) handily turned down a special election Land / Curtis Park Street Light assessment tax in January 2008 with 84 percent opposed and 14 percent in favor.

Meanwhile, Gaylord, MN., leaders defeated a street light utility fee last December, about the same time Fargo was weighing the issue. Gaylord’s proposed fee: $2.17 per month for households; $4.34 monthly for institutions such as churches and schools; and $6.51 each month for commercial and industrial.
At issue were concerns for already financially strained households; the mindset that street lights are a city obligation; inequities in payments by some relative to actual street lighting in their neighborhood; and the notion that a fee is basically a tax.

Bemidji leaders backed off entirely after a 2009 public outcry over a proposed $2 monthly street light fee. Brainerd, MN, has been exploring the use of timers on some street lights, reportedly saving over $20 per light per month.

Minneapolis’ new street light fee, effective late October 2009, is charged only to properties or entities that do not already pay property taxes, excluding schools and public facilities. Minneapolis leaders balked at charging all property owners with a street light fee earlier in 2009. That fee, according to city documents dated July 2009, was “being proposed instead of cutting back on street light repairs, limiting the hours that the lights are on, or turning them off altogether to save money.” The defeated Minneapolis citywide fee was estimated to raise $3 million annually, however the finalized fee only for non-property taxpaying entities will raise $155,000, a mere revenue increase of $104,000. The result was a far cry from what street light fee advocates originally wanted.

Other Minnesota cities with fees in place, according to the Minneapolis documents, included Apple Valley, Brooklyn Center, Brooklyn Park, Cottage Grove, Crystal, Eagan, Forest Lake, Maple Grove, North St. Paul, and Oakdale.

The St. Cloud information packet compiled in March 2009 is substantially the same information provided the Fargo City Commission. However it appeared abbreviated and did not include a third page listing Minneapolis and St. Louis Park as having considered but not having approved street light utility fees. Neither did it mention an additional 11 cities, such as Bemidji, then still looking at the proposals.

Back to Fargo

The street light fee rate structure was approved by the Fargo City Commission Dec. 14 with Mayor Dennis Walaker, and Commissioners Tim Mahoney and Brad Wimmer voting yes, and Commissioners Mike Williams and Dave Piepkorn voting no. At that meeting, the rates proposed for households and commercial entities were reduced from earlier proposals, while an entirely new category was added for apartments, (53 percent of Fargo residents, by the way).

Monthly fees assessed in Fargo effective January 1 are $2.50 per month residential, $2 a month per unit in multi-family apartments, and $8 per month for commercial customers. While city street light costs are approximately $900,000 annually, the new fee schedule will generate nearly $1.6 million annually.
The strongest opposition was posed by Commissioner Williams, who contended then, and to this day, that the street light fee was buried in the current budget and not clearly explained to the public that there would be a change in how street lights are paid, going from the general fund to a special fee paid by the people.

“The total budget for this year went from $173 million to $198 million, (a) 14.6 percent increase. Now we’ve got $1.6 million in here,” Williams admonished the Commission Dec. 14. “We’ve assumed—put in the last budgets for generations—the lighting fees. They’re in this budget now.”
Williams reminded them that the mill levy has decreased from 61 to 58 over a 19 year span.

“This talk about having to raise the mill levy 5 mills for the $1.6 million is disingenuous. The (budget) narrative did not explain that, ‘Oh, by the way, there is going to be a vote on increased fees in December.’ That’s not what we read in the narrative, that’s not what the budget has shown in the past 19 years… We don’t need to make a mistake right now. it’s already in the budget, it’s not some new expense.”

Commissioner Piepkorn’s vote against the street light fee in December was because of the “people’s perception why we are trying to shove this through,” adding that it was a good concept, however it was flawed in execution.

Neither opposing commissioners, Williams or Piepkorn, are up for re-election in June. The other three seats are, with Wimmer and Walaker already announced, Mahoney expected to run. If and how this plays out politically is anybody’s guess.

Interested readers can pique their curiosity further upon doing an Internet search for street light fees and the likes. We found recurrent themes represented by communities that implemented such fees, and similarly for those who did not. A cursory look at the current track record would lead one to conclude that given a chance to vote, the people may well say no; even when voting on rate increases.

In addition to research information and a review of the Dec. 14 Fargo City Commission meeting, HPR asked for and got significant clarification from City Administrator Pat Zavoral and Finance Director Kent Costin, who along with Mayor Walaker comprise the Finance Committee, the original source of this proposal in Fargo.
“It has been discussed at the Finance Committee level for two years. It is part of the ongoing research on how other cities are making up for a slow down in property taxes due to the fall out in the housing market,” Zavoral wrote HPR. “Most of the research was done in Minnesota, and other ND cities. It’s a pretty common financing tool for cities. It has taken on more significance as the electrical cost of the street lighting has risen. This is especially an issue where street lights are owned by privately held utilities such as Excel, which not only charges cities for electricity but also maintenance of lights.”

Fargo used Bismarck’s fee structure as the model. There are over 11,000 street lights in place in Fargo. “The police have facts to show a well lighted city is a safer city. Doing without street lights in a northern climate city, especially in the winter is not a good idea,” Zavoral continued. “Not everyone has a street light in front of their homes, or places of business, but everyone does drive in the city on streets that are lighted…Keeping property taxes down by using fees for specific costs is a general financing procedure.”

Zavoral contended that this fee proposal was not buried in the current budget at all. “The City Commission was alerted to this new fee in the Mayor’s letter to them when we submitted the budget for review back in August,” he told HPR. “It went through at least two public hearings in the budget approval process and not one citizen came forward nor any Commissioners raised a concern.”

Costin confirmed that finance staff routinely examine financial activities of several other governments both locally and within the region. “Many good ideas come out of basic research and often times you simply need to evaluate the merits of delivering and funding services in different ways,” he said.

“That’s part of the duties of a responsible administration, view how other cities address ongoing budget issues. I don’t want to point fingers at who said what when on this issue, it was a collective decision to explore it when it was brought to our attention as a method of financing street lights,” Zavoral explained to HPR…

On the Horizon

Besides fodder for debate for two seats on the Fargo City Commission and the Mayor’s position up for election June 8, there is a lingering notion that had the public gotten engaged more in Fargo—like in other cities where the street light fee was in fact overturned—the majority vote could well have tipped 3-2 the other way last December against this new revenue source, be it called a fee or a tax, or whatever. It also begs the question: What else lies over the horizon?

“Just like when the issue of raising the fees for cable television was brought to our attention, which we haven’t at this time, but we’ll continue to review it,” Zavoral’s email to HPR concluded. “Other issues that we are tracking are the cost of cell phone fees, versus hard line phone fees. With everyone going to cell phone usage the city’s franchise fees on hard lines is dropping like a rock. How does a city make up for lost revenue and still keep property taxes level and not raise them. The city’s share of the property taxes is 12 percent of every dollar, it has been that way for the last 20 years. Property taxes represent 23 percent of the city’s total revenues for its general fund. The cities have to come up with other resources to keep those percentages from rising, since the schools have only property taxes to fall back on when the state isn’t there.”

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