The proposed franchise fee for the La Plata Electric Association, which is up for a second vote this November, took a beating Monday as both a regressive tax on the city’s “most vulnerable residents” and as a “double tax.”
“This is a hidden tax that affects the least able to afford it,” said critic Tom Darnell during a ballot issue forum organized by the League of Women Voters of La Plata County at Durango City Hall.
Because electricity is a basic necessity, Darnell said the fee is the equivalent of the city putting a special tax on food.
Darnell also argued it was a double tax because the city will still impose a regular sales tax on LPEA’s electricity and base charges in addition to the 4.67 percent franchise fee on electric consumption.
So the same kilowatt hours would be charged twice, Darnell said.
The franchise fee, which generates about $930,000 annually for the city’s general fund, was narrowly defeated by 41 votes in April as city officials have since acknowledged that they did a poor job of explaining a 20-year renewal of the franchise and took it for granted that people support it as they have done for decades in the past.
So city residents have not had to pay it as of May.
Darnell, a 26-year-resident of Durango, spent about $940 on a mass mailer to help defeat the franchise fee during the first go-round.
Technically, the franchise fee is charged to the LPEA, but the electric cooperative passes the fee to its customers on their monthly electric bills.
After Darnell’s debate with City Councilor Dick White, City Manager Ron LeBlanc noted that it’s normal for businesses to pass on their costs to their customers.
LeBlanc said the sales tax and the franchise “are completely unrelated.”
“If you go to McDonald’s and buy a Big Mac, you get a sales tax but you’re also paying the franchise fee to (the local franchisee for) McDonald’s. For them to be able to sell you a Big Mac, they have to be paying McDonald’s a franchise fee,” LeBlanc said.
In acknowledging Darnell’s concern for low-income residents, White said the city would be forced to cut services without the revenue generated by the franchise fee. The city decided to go for a second election because there was no appetite from the public for budget cuts, officials have said.
This time around, the fee was tweaked to encourage conservation because it will be based on only electric consumption. So consumers could lower their fee by turning off their lights. The fee is supposed to cost residential consumers an average of $3.64 a month.
The City Charter was also changed during the summer to allow all registered voters in the city to participates.
Previously, franchise votes were limited to only property owners registered to vote in Durango.
Connie Matthews, who lived within the city limits during the spring, can’t participate this time because she has moved out of town.
“Interestingly, I have rental property in town. So I’m a property owner in town, but my residence is in the county. My renters will vote on this, and I can’t this time around,” she said.
Matthews, who also owns the Spaaah Shop & Day Spa, 934 Main Ave., has turned against the proposed franchise agreement.
“I voted for this the first time because my reasoning was I could afford it. If I were to vote again today, I would totally vote against it because city sales-tax revenues are up 6 percent,” she said.
“A lot of that revenue has already been made up. I am convinced there are other sources that can fill that gap. Ultimately, as our economy picks up, this will all be a moot point,” Matthews said.
Because there is a possibility that LPEA will increase its electricity rate next year, Darnell thinks that the city revenue from the fee could be as much as $1.2 million if the fee is approved by the voters.