Erik Burgess, Published August 30 2013
Streetlight fee being considered by Moorhead increasingly popular across MinnesotaMOORHEAD – Residents here could see an extra couple of dollars tacked onto their utility bill next year, but it’s not money meant to keep their own lights on.
A streetlight utility fee is one option city leaders are considering as a remedy for a $400,000 shortfall in the 2014 budget, a fee that City Manager Michael Redlinger said is becoming popular across Minnesota as a way for cities to pay the bills.
About 15 cities in the state have a streetlight fee, including East Grand Forks, which has charged the fee since 1997, said Dan Boyce, general manager for the East Grand Forks Water and Light Department, a municipal utility like Moorhead Public Service.
When the fee was instituted years ago, East Grand Forks leaders were trying to balance the budget, as Moorhead is now, Boyce said.
The monthly fee in East Grand Forks started at $1, and now is $4.50. The money goes towards paying streetlight electricity and maintenance, as it would in Moorhead.
A $2 monthly fee in Moorhead would mean $360,000 for the city. A $3 monthly fee would be $540,000, and a $4 monthly fee would be $720,000.
Any streetlight fee here would be on top of a $3.65 monthly forestry fee – which is proposed to go up to $3.93 in 2014 – a 75 cent mosquito control fee, a 25 cent animal control fee and a $1.60 right of way maintenance fee.
East Grand Forks also has a number of fees: a $1 insect control fee, a $4.50 streetlight fee, a $4.50 storm sewer fee, a $1 greenway maintenance fee and a $5 recuse unit fee.
Fargo, too, has fees for streetlights, water, wastewater, forestry, storm sewer, vector control, street lighting and solid waste.
Fixing budget woes with fees could remind some Minnesotans of the tenure of former Gov. Tim Pawlenty, who promised not to raise property taxes during his first term and instead backed increases in fees to make up a deficit in the state’s budget.
“There’s probably been some of the same sentiment (in East Grand Forks),” Boyce said. “‘Revenue diversification’ I think is the fancy name that gets put on it.”
But when state aid is reduced, the public’s expectation for services doesn’t reduce proportionately, which means cities have to look for ways to generate revenue, Boyce said.
“And if it’s not through taxes, it’ll likely be through fees,” he said.
Moorhead has recently discovered its options are not as limited as officials thought when the streetlight fee was first floated.
City staff found out Monday that an oversight by state lawmakers means a one-year levy cap won’t actually limit the city’s ability to raise property taxes through the operational levy. Still, Mayor Mark Voxland said he doesn’t want to raise the operational levy by much.
The city is already proposing an 11 percent raise to its debt levy, which goes toward paying the city’s bonds. That equates to a $40 bump in taxes on a $139,900 home.
Which means the streetlight fee is still one of the few options Moorhead has, Finance Director Wanda Wagner said. The city can’t afford to cut spending without significantly affecting services, she said.
“It takes so much money to run the city, and it needs to come from somewhere,” she said. “We have very few options to generate that revenue.”
The City Council will look to pass a preliminary levy amount and budget on Sept. 9.
A ‘much broader base’
Boyce said there’s “some degree of perceived fairness” with fees. Everyone pays the same amount, and even tax-exempt properties have to pay a streetlight fee.
That’s a big reason why Moorhead is considering it, Redlinger said.
Twenty-seven percent of properties, based on total market value, are tax-exempt in Moorhead. In Mankato, which implemented a streetlight fee earlier this year, 33 percent of property is tax-exempt, Redlinger said.
“In the regional centers, there is a significant amount of tax exempt property – government property, higher education, et cetera,” Redlinger said, and fees open up “a much, much broader base” than a standard tax, he said.
So why charge a fee for streetlights in particular? Cities in Minnesota can only charge fees on certain things by statute, and streetlights happen to be one of them, Wagner said.
Plus, streetlights are an increasingly costly service that all residents need.
“Everybody benefits from street lighting,” said Kent Costin, finance director for the city of Fargo. “It’s all about having a safe and secure community, and streetlights kind of play into that.”
Costin said Fargo started assessing the fee in 2010 to help combat the “skyrocketing cost of electricity,” which has jumped 61 percent since 2005, on average about 9 percent a year. The city has about 11,000 streetlights and expects to spend $1.1 million in 2014 to cover electricity, not including staffing and maintenance of the lights.
Fargo collected over $1.5 million for the city in 2012 with the streetlight utility fee, Costin said. Fargo charges a base residential rate of $2.50 a month, a multifamily rate of $2 a unit, and a commercial rate of $8 a month.
The cost of streetlight operation and maintenance in Moorhead has risen in the last decade, according to information provided by Redlinger. Moorhead paid $637,715 last year and is estimated to pay $672,000 this year.
“Over the long haul, that (electricity cost) trend has been upward,” Boyce said. “And as you see more transmission lines being built, those billions of dollars of cost get paid by the consumers of electricity, in the end of things.”
Readers can reach Forum reporter
Erik Burgess at (701) 241-5518