City council considers utility franchise fees to offset tax levy
City Manager presented the preliminary 2026 budget to the Roseville city council
The Roseville City Council is considering entering into a new franchise agreement with Xcel Energy and for the first time instituting utility franchise fees for gas and electric customers to help offset the city's tax levy.
Under Minnesota Law, statutory cities have the authority to grant franchises to privately-owned public gas and electric utilities for the use of public right-of-ways. The city would need to pass an ordinance which would set expectations between the city and the utility company, including how the company constructs, operates, and maintains equipment located on public grounds and rights-of-way. Roseville had been in a 20-year franchise agreement with Xcel Energy, but it expired in 2018. Since then, Xcel still pulled permits for any work needed in the right-of-way, but there hasn't been a franchise agreement ordinance in place.
The city council reviewed two draft ordinances, prepared by City Manager Pat Trudgeon, at the August 25 meeting, but were not asked to make a final decision on them. You can read those here:
Draft Electric Franchise Ordinance
Gas and Electric Franchise Fees
Trudgeon also presented an option to the city council to begin imposing franchise fees on the utility company for use of the public rights-of-way to deliver service. The franchise fees are then charged to all customers, including tax-exempt properties. The utility company would collect the fees from customers, then pay the cumulative amount to the City of Roseville. The fee could be a flat rate or a percentage of energy consumption used by each utility account. Trudgeon is recommending a flat fee, which would mean both customers and the city would know exactly how much was owed each month and it would not vary with the weather or changing climate.
According to Trudgeon's report, city staff reached out to other Ramsey County cities to find out which cities have franchise fees on electric and/or gas. They discovered that Roseville is likely the only Ramsey County city without a franchise fee in place. (City staff did not hear back from Lauderdale, Gem Lake, or White Bear Township as of the Aug. 25 meeting.)
Based on data from other Minnesota cities presented at the meeting, the median amount of the monthly charge for electric and gas customers is $4. Xcel Energy estimated that an electric and gas franchise fee could generate between $2.1 to $2.8 million per year for the City of Roseville.
During this meeting, Trudgeon also presented the proposed 2026 city budget. The addition of these franchise fees would strengthen the city's right-of-way infrastructure capital funds without needing a new tax levy. It would also allow existing levy dollars to go toward the costs of hiring more public safety personnel in the police and fire departments.
The city council was not asked to vote on implementing franchise fees at this meeting.
In the budget presentation, Trudgeon gave a detailed explanation of the proposed city budget and the different funding sources available. For example, both the police department and fire department are asking for significant budget increases to hire more personnel. They have also each applied for federal grants (a COPS grant and a SAFER grant) to help offset these costs, but the city will not know if they are awarded these grants until after the preliminary budget is voted on by the city council. They expect to find out later this fall and the preliminary 2026 budget will be approved at the September 22 city council meeting.
Contributing Writer
Naomi Krueger
In one budget scenario, the city's tax levy would increase by 13.44%. This scenario includes the additional staffing for Police and Fire Departments without receiving the grants.
If instead the city is awarded both grants and imposes the new gas and electric franchise fees, the city's tax levy would only go up by 7.96%. If no grants are received, but the city imposes franchise fees, the tax levy goes up by 10.23%.
None of these numbers are final. City staff are also still waiting for information on the estimated tax impact on the average household, which will be presented at a future meeting.
For a detailed look at how the proposed franchise fees would impact next year's budget, watch Trudgeon's August 25 presentation on the recommended 2026 budget and the franchise fee option and the city council's discussion:
Next Steps for the 2026 City Budget
Aug. 27 - City Manager presents 2026 budget proposal to the Finance Commission
Sept. 15 - Finance Commission provides budget recommendations to the City Manager
Sept. 22 - City Council to adopt preliminary 2026 City and Economic Development Authority (EDA) Tax Levy and Budget
Nov. 10 - the City Council will review the 2026 Utility Rates and Fee Schedule
Dec. 1 - Final Budget Hearing (Truth-in Taxation Hearing)
Dec. 8 - Adopt Final City and EDA Tax Levy and Budget, Utility Rates, and Fee Schedule
All budget meetings are open to the public, streamed live online, and available to watch later. If you come to a city council or commission meeting in-person, you will have an opportunity to participate in public comment. View the upcoming meeting schedule.
