Faced with the unpleasant task of cutting services or raising taxes, Durango was urged Wednesday to try again to get voter approval for the franchise extension for La Plata Electric Association, which was supposed to generate $20 million for the city over the next 20 years.
But voters on April 3 rejected the franchise by a margin of 40 votes out of 1,700 votes cast.
“We can do a better job of educating the public,” City Councilor Sweetie Marbury said during a hearing to explain the city’s financial predicament.
Because of healthy reserves, the city has the savings to avoid making big cuts or tax increases in the short term until the franchise fee is restored. The fee had represented about 3 percent of the city’s general fund budget of $28 million.
The city also would have the time to correct one of the criticisms with the recent election: that it was restricted only to city voters who own property in the city. Because City Councilor Dick White’s house is owned by a trust, he could not participate in the franchise referendum.
The City Charter would have to be changed during the general election in November before all voters could participate in the franchise election, which could coincide with the election of city councilors in April 2013.
Passage of the franchise extension used to be a “no brainer,” but the current anti-tax climate has made passage of dedicated sales-tax increases for popular programs such as the library or parks challenging, officials said during the hearing.
Because LPEA had passed the 4.67 percent franchise fee on to consumers on their electric bills, opponents of the franchise agreement had argued that the fee really was a tax. Because the current franchise agreement does not expire until Tuesday, the city’s shortfall for the current fiscal year is expected to be $600,000.
Michelle Reott, a city resident, wondered how a campaign could raise popular support for a franchise agreement, which gave LPEA access to the city’s rights of way. This led City Manager Ron LeBlanc to joke about a “friend of the storm-drain” program.
Without a new franchise agreement, the electric cooperative will have to get construction permits to work on city property, which is going to cause administrative headaches for both the city and the utility, LeBlanc said.
LPEA will continue to provide power because the city has no interest in shutting off electricity, LeBlanc said.
The city also could consider an occupational tax for LPEA, which is similar to a franchise fee. It would have to be approved by the voters in November.
Officials, however, would have to determine how much money should be raised from the occupational tax. No one seems to remember how the city set the franchise fee of 4.67 percent, which is at least 20 years old, LeBlanc said.
The occupational tax still would be passed on to consumers on their electric bills.
The city will hold hearings at noon and 6 p.m. today to explain the city budget hole.
LeBlanc was disappointed that the loss of the franchise fee comes when the city is just recovering from the recession. Some anticipated new programs, such as a block grant to encourage economic development and a new position for a volunteer coordinator, are among the more obvious cuts.
Some options for raising taxes included the city’s relatively low property and lodging taxes. But even these are problematic because officials questioned the fairness of making property owners pay for services in a city with so many tourists, and lodging taxes typically are dedicated funds limited to public transportation and marketing.
An earlier version of this story gave the incorrect day of a public hearing to discuss the city’s finances.