Fort Thomas city council’s Law, Labor and License committee is recommending the city change the way it funds its street and sidewalk improvement program.
The switch would be a major change for the city that has funded its annual streets program through cost-sharing with affected property owners. Those who own property along the streets scheduled for repair would usually be assessed 50% of the cost. The new plan would be to fund the program through franchise fees tacked onto monthly Duke Energy bills.
Franchise fees are how all other Northern Kentucky cities fund street programs. The cost of street and sidewalk maintenance, therefore, would be shared more broadly across anyone within the city limits who receives a monthly bill from Duke. Instead of splitting costs each year between the city and a small group of property owners, all residents would share costs – whether or not they own property.
Changing how the street program is funded has been an ongoing discussion in the city for many years. Many residents have charged that it is unfair because everyone uses the streets in the city, not just specific property owners. The length of the sidewalk has determined costs as well, leaving some property owners who happen to live on a corner with more cost than those who do not have a corner lot or those living on a cul-de-sac. Another complaint has been that those living on a state route, such as Memorial Parkway, are not assessed at all.
Considering franchise fees
Fort Thomas City Administrator Matt Kremer said this round of discussion came as the city’s Public Works Committee looked at next year’s streets program.
“We started discussing moving forward on things we could do in order to not have to do the street assessments, because it’s a challenge for staff and a challenge for citizens who get those bills,” he said.
For staff, the challenge has been the time it takes to do the assessments and the work involved. To save money, the city has used public works staff to do a lot of the work necessary for the street and sidewalk maintenance.
Kremer said that while this has effectively kept the streets program on track, it has made it difficult for staff to meet other goals and other projects around the city.
One solution would be to contract out more street maintenance work, but contracting out costs more money. An increase in franchise fees could bring in additional revenue.
“So, one of the things that a lot of cities use, and it’s a good situation for us, is to increase the Duke Energy franchise fee in order to cover the cost that normally would be billed to the citizens directly,” Kremer said. “Currently, our franchise fee is a flat rate. I think we’re the only ones in Northern Kentucky that has a flat rate. For my house I pay 71 cents, St Elizabeth pays 71 cents and so on…”
He explained the current flat rate brings in about $50,000 per year that goes directly into the city’s general fund and is not designated for streets or any other specific need.
Changing the fee from a flat rate to a percentage would be a first step in making it a better source of income.
Good timing for a change
For Fort Thomas, the 10-year agreement with Duke Energy will expire next year. As the time approaches, the city will examine the agreement to determine if anything needs to be changed in restrictions or fees.
Kremer said he expects to bring the agreement to council for discussion over the next six months. Now is a good time, he said, to consider any changes in what Duke is permitted to do and whether the city wants to change the franchise fee.
“The franchise agreement is also not just a revenue source…It puts limitations on what Duke can do in our right of ways… They kind of do what they want. So it’s great that we can really limit what they can do on our right of ways. They have to let us know if they’re going to be making any changes,” he said.
With the updated franchise agreement, Kremer said the city council will vote on raising or lowering the rates.
Determining the franchise fee
The Law Labor and License committee includes council members Andy Ellison, Jeff Bezold, Adam Blau and Ben Pendery.
Ellison, chair of the committee, asked about fee percentages.
Kremer said 5% is the maximum acceptable throughout the country. Most city’s average franchise fee in our area is about 3%.
Ellison said he’s researched and looked at the state’s website. He found most of the agreements but didn’t see the ones for Florence, Covington and Newport. Kremer responded that Covington’s franchise fee was near the top at 4.9%.
“So they are higher. For everybody else that would be similar to us, the average is 3.08, and that’s only because Edgewood is 1.9 and Bellevue is 3.5; everybody else is at 3%,” Ellison said. “Looking at the 2024 resurfacing estimate of cost, even if the contractor does all the work, is $500,000. So we can get that entire amount so nobody would be assessed?”
Committee members discussed how much is spent presently, and how much the city could do with additional funds.
Kremer cautioned that street maintenance is ongoing, especially in older cities. It will never be that the city “catches up” with all its street maintenance needs.
“We just got our street assessment of the entire city, where now we have a rating for every street. As typical with most cities, we’re not ahead,” Kremer said. “So don’t think that we’re spending too much on streets…What you want to do is look at a 25- to 30-year picture…We don’t want huge years and then come down low, right? We try to even that out.”
He noted that the city has tried to keep up with things like patching old curbs, but at one point, more curbs will need to be completely replaced. Having some additional funds would allow for adding more streets or curbs each year to avoid having to do a large number all at once.
Raising the franchise fee now, he said, could help keep the budget for street maintenance steady. He also said that without going through the assessment process, planning for street maintenance could be more flexible. The city could add some streets for repair if money was left over after the year’s targeted streets were done, or that extra money could be rolled over to the next year. He’d have greater flexibility to add or change streets as the situation dictates.
Although there would be no need for a formal public hearing for the streets program, the city would still meet with those on the streets affected, and the projects would be discussed with residents, he said.
Narrowing it down
Kremer noted that a franchise fee of 1.5% would bring in an additional $150,000 to the streets budget.
“At one and a half percent, my house bill would go up about $45 a year, so that gives everybody a frame of what this would mean,” he explained.
With the city having a long list of streets in need of repair and more work expected for curb replacement in coming years, committee members were concerned that maybe 1.5% would not bring in enough.
After much discussion, the committee approved a proposal to recommend the city adopt the franchise fee percentage at 2%. Members agreed that amount would bring more money to the program, but would still be less than most other cities spend. They agreed, as well, that the city would revisit the plan in three years to see how things were going. The city could then make adjustments if needed.
Kremer said he would give the council a full report each year on how the money was spent and that in three years, they should have a good picture of how the program is going.
Built into the franchise agreement, there has been the option to make changes at any point as long as a 90-day notice is given.
The committee voted to recommend the city end the assessment program and adopt a 2% franchise fee.
Next steps
The recommendation from the committee will be presented to council at the next council meeting.
Kremer said he would write up a municipal order that would state that the council wants to increase the franchise fee to 2%, that the funding would be dedicated to the street program, and that as long as this is in effect, the city will no longer do the street assessments. He said he would also add that the program will be revisited in three years to see how things are going.