Your Comcast Franchise Fee-- A "Hidden Tax" You Pay Oro Valley

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We noticed a francise fee on our last Comcast bill.  Its been there for years.  We just never noticed it.  We asked our colleague, John Musolf, to research it and report on it for us.  Here's the result:
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The Town of Oro Valley receives approximately $500,000 in franchise fee revenue per year from the Comcast Cable Television Network.   This revenue is seen in the xxx fund in the town's budget.

The right to charge this goes back more than 30 years, when Jones Cable ran the system. The Comcast Cable Franchise agreement with Oro Valley was extended from March 19, 2013 to March 19, 2018 for 5 years.  It was signed by Greg Caton, Julie Bower, and Tobin Sidles.   We cannot find where it was reviewed by the Town Council!

The cable television franchise fee in the United States stems from a community's basic right to charge for use of the property it owns. The cable television franchise fees represent part of the compensation a community receives in exchange for the cable operator's occupation and the right-of-way use of public property. A franchise fee is not a tax; it is a rental charge.

Franchise fees are governed under Section 622 of the Cable Communications Act of 1984.

Section 622, states that municipalities are entitled to a maximum of 5% of gross revenues derived from the operation of the cable system for the provision of cable services such as public, educational, and government access (PEG) TV channels. There may be other increased revenue contractual specifications above the 5% such as fee payment based on subscriber volume.

If a citizen of Oro Valley is a subscriber to the Comcast Cable Television Network, they are probably unaware that they are helping Comcast provide some of the franchise revenue to the Town of Oro Valley. On the Comcast subscriber monthly invoice there is a franchise fee that a subscriber is paying to Comcast Company. This in turn is used by Comcast to help pay for the franchise fee to Oro Valley."
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Thanks for the research, John.  Call it what you may.  The franchise fee is a tax, one that at charged by Oro Valley to Comcast that, in turn, is charged to you.
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Bits and Pieces

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Tonight is the grand opening of the Oro Valley Aquatic Center.  Festivities start at 5 PM with a ribbon cutting and guest speaker.  And then at 6PM there's a community pool party that runs till 10PM.   You get a chance to meet Olympic champion Lacey Nymyer John and watch a movie at 8 PM.
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 Saturday is the first swimming to be held at the aquatic center.    It is an 8-U meet. "On Saturday, after the competition, the pool will re-open to the public at 3 p.m. (general admission prices apply), and the Town will host a dive-in movie event at 6:30 p.m. for the athletes, their families and the general public. The film will be Madagascar 3, in keeping with the swim competition’s “Under the Big Top” theme." (Source: Oro Valley Press Release)
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Tomorrow, from 10 AM to 2 PM, the Oro Valley Police will be holding a "check the kids car seat" event at the Oro Valley Marketplace.  "With an estimated 85 percent of car seats installed incorrectly, the purpose of this event is to educate caregivers about the importance of car seat safety and proper installation. Certified passenger safety technicians will be on-site to provide one-on-one "hands-on" help with installation." (Source: Oro Valley Police Department Press Release)
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"In an effort to expand the existing Shop Oro Valley Campaign and Business Retention and Expansion Program, the Town of Oro Valley and the Greater Oro Valley Chamber of Commerce partnered to launch OV Cash Mob. The first event will be held Thursday, March 21 at 4 p.m. Participants, or "mobbers," are asked to meet at Town Hall, located at 11000 N. La Canada Drive, where the first business will be announced...Following the March 21 OV Cash Mob, mobbers are invited to attend the Greater Oro Valley Chamber of Commerce's mixer at the Quality Inn and Suites, located at 7411 N. Oracle.

Cash Mob accomplishes several objectives," said Chamber President/CEO Dave Perry. "It raises awareness of local businesses and what they offer, and it keeps money circulating in Oro Valley. Add on the social and networking opportunities at our mixer that evening, and we'll have a fun, valuable time."  (Source: Oro Valley Press Release)
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Check your Comcast Cable bill.  Mine includes a $7.38 franchise fee paid to the Town of Oro Valley.  Another hidden tax we failed to detect.
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Is A Franchise Tax A Good Idea For Oro Valley?

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The Town of Oro Valley issued its 2013 strategic plan in January. The 10-page document is available here. The plan set strategic goals in four areas: fiscal responsibility, communication, economic development, and community services.

The fiscal responsibility goal is to "Maintain long-term financial health through diversified revenue sources while investing in community initiatives". Two strategies are defined to implement this goal. One is to ensure the long-term viability of revenue sources to the town. One of the actions listed in this:"Evaluate opportunities to diversify the Town’s revenue sources."

Last week, we wrote about one of the ways the town can diversify revenue sources: a tax on rental revenues. Our purpose in this posting was to begin a dialogue about whether or not that type of tax would make sense in Oro Valley since it is a tax that is frequent  among our northern neighbors.   It is a tax that would not directly affect many of us. However, it would affect some of our newest neighbors and may not be preferable.

Oro Valley's 2013 strategic plan document identifies another revenue source: "Franchise agreements" with utilities.   Unlike the rental tax which would impact only a few residents a  franchise agreement would cost all residents.

In January, we wrote about a franchise tax  In our posting: " Oro Valley Is Considering A Franchise Tax".   We thought that it bears repeating in the form of a second posting because if a franchise tax is ever approved would add another 4% or perhaps even 5% to your utility bill, a bill that is already burdened with a 4% utility tax that is paid directly to the town of Oro Valley's general fund.

What is a franchise agreement? It is an agreement between a utility and the town under which utility's charge an annual fee for the right to use the towns right-of-ways.  That sounds "benign" enough, doesn't it? After all, it's the big bad utility that pays the fee. The town gets a fee.   On the surface, the does not appear to impact residents.

Not so! A franchise fee is just another tax that will appear on the utility bill. You see the utility will not eat the cost of this franchise fee.  Nor will they share it amongst all their customers. They will simply charge it back customers who live in Oro Valley.

Voters would need to approve a franchise fee.

Is a franchise tax a good idea for Oro Valley?

What do you think?
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Undergrounding The Power Lines: Our Citizens Opine

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Eight citizens spoke publicly about under-grounding TEP transmission lines at last Wednesday's Special Oro Valley Town Council Session.  We've previously written on the issue in our posting: "Would You Spend $2.1 Million?"  For more on this, read our special page entitled: Primer:  Underground TEP Wires.

Most of the speakers were in favor of under-grounding of the transmission lines to preserve aesthetic and scenic views.

Issues that arose during the study session include:

• Who should pay for burying these wires? 
• The Town considers the zoning code, adopted by Ordinance, to be legally valid and binding on TEP.   To date, TEP has been unwilling to locate lines underground without up-front payment for the differential cost of above ground versus underground installation for infrastructure improvements not associated with any particular development. TEP has placed the burden of paying the differential cost on the Town. TEP's refusal is based on a ruling by the Arizona Corporate Commission.
• TEP helped craft the Town of Oro Valley Ordinance requiring the power lines be buried. All developers have had to comply on their projects. TEP may have a potential conflict of interest in recommending that Transmission Poles be used on these projects (per TEP’s standard internal policy policy of above grounding) instead of undergrounding.
• Should ADOT pay for burying wires on Oracle Road?  Some information was introduced that question whether some of the Oracle Project cost should be borne by ADOT. The reinstallation of poles where under-grounding now exists may be against state law. The Town attorney should investigate statutes 40-352 and 40-353 for clarification.
• Can the three proposed projects be unbundled?  TEP opposed this.
• How can Oro Valley reduce construction cost?  There was mention of the Town subcontracting some of the infrastructure to save cost instead of using the normal TEP subcontractors.
• What about current view obstructions?  Some spoke of the fact that on the Tangerine Project there would still be existing transmission poles that cannot be undergrounded because of power engineering constraints in undergrounding them. These existing poles have already compromised the scenic view. TEP is recommending further compromising of the scenic view with added above ground poles.

Funding of this project is a major issue.  This was also discussed during the study session.

One idea is to borrow the funds form the contingency fund.  Repayment would come from a yet to be determine source.

One funding source a franchise tax, seen as a potential source of continuous funding of the buying utility lines.  Voters would have to approve this tax in August if Council decided to move ahead it.  We noted in a previous posting that a franchise tax is a pass-through tax.  It would be included in your utility bill.

Another suggestion is that the Town of Oro Valley might consider lending the $2.1 million to TEP as a loan and have TEP pay it back with interest.  Oro Valley should not be subsidizing a multi-million dollar public utility. TEP is a subsidiary of UNS Energy Corporation.   This is an unlikely alternative as it would require litigation.

The Wednesday's council meeting includes a hearing on the under-grounding and whether to use the contingency fund for the $2.1 million cost. Then the Council would study all alternative methods to fund the $2.1 million cost.
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Our thanks to John Musolf for contributing this posting.

Oro Valley Considering Franchise Fee

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There is a second discussion item for this Wednesday's special Council Meeting.  It regards the idea of creating a Franchise Agreement between the town and a public utility.  Read about it here.  A franchise agreement gives the utility the right to use town "right-of-ways."  In return, the utility pays the town an annual franchise fee.

You will have the opportunity to vote on this next May if the Town Council votes, at some point, to recommend it to you.  It becomes law only when the voters approve.

Sound's like a great idea, right? The Town of Oro Valley gets a sustainable source of revenue and an agreement on how the right of way can be used.  The Utility then pays for the right to use that right-of-way.

Here's the problem: "when a franchise fee is levied on a utility the fee is passed on directly to the customer and itemized on their bill as a municipal fee."

That's right. A franchise fee imposed on a utility becomes a back door tax for you to pay on your utility bill.  This is in addition to the Oro Valley utility tax that you already pay.

The typical franchise levy on a consumer utility bill is 5%.  The current Oro Valley utility tax is 4%.  The total is 9% simply because you turn on your lights or have a landline.

What do you think?  Is this a good or a bad idea?
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