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March 29, 2018 • EPE Related News

El Paso Inc.: City pushes electric franchise up to $27M

The price that El Paso Electric must pay the city for use of its streets is going up by more than $5 million – to a grand total of $27 million.

El Paso City Council approved the increase Tuesday on a 6-2 vote. The $5.6-million – which amounts to a 1-percent hike in the utility’s franchise fee – will be passed on to utility customers who live within El Paso city limits starting in May.

Despite that hike, the average residential bill will drop by $3.83, thanks to the utility’s rate reduction following changes in the corporate tax rate.

Had the city proposed a $5.6-million increase in property taxes, there would have been public notice and discussion. But at Tuesday’s City Council meeting, raising the franchise fee was approved without explanation in less than 10 seconds.

City Rep. Alexsandra Annello, who voted no with Rep. Peter Svarzbein, said she voted against the proposal “because I didn’t have enough information about it.”

“I didn’t feel like I understood enough of what was going on with it,” she said, adding she expected a presentation but opted not to ask for one. “I just fundamentally don’t believe this is the way we should be doing this.”

Proceeds will go into the city’s Impact Fund for economic development.

The city now assess a 4-percent franchise fee on the electric company, sending $17.2 million to the city’s general fund and $4 million to the Impact Fund in fiscal 2017.

Three-quarters of 1 percent of the franchise fee currently goes to the Impact Fund, providing more than $2.5 million a year to the Medical Center of the Americas Foundation, $300,000 to the Project Arriba training program and $250,000 to the Hub of Human Innovation.

The additional $4 million will allow the city to sweeten incentive packages to lure new business or industry to El Paso and help homegrown companies with ambitious projects, said Jessica Herrera, the city’s director of economic and international development.

“Cities need to remain competitive, and economic development in El Paso, Texas, is not structured as other cities across the state are,” Herrera said.

Some other cities use a half-cent of their authorized sales tax to establish economic development funds they can draw from to support new development more aggressively than El Paso, which relies largely on property and sales tax breaks.

In 1987, El Paso County tapped the last half-penny of sales tax that the Texas Legislature allows local governments to assess.

Last week, Mayor Dee Margo said the $42 million that half-penny of sales tax generates for the county could do a lot for the city. He didn’t say what he intends to do about it.

Having a large economic development fund can help “when you’re trying to close on a project or to be able to work toward securing a corporate headquarters,” Herrera said.

Recently, she said, the city was able to use its Impact Fund to entice a San Francisco tech company, Five Stars, to expand into El Paso.

“We were able to tap the fund to secure the hiring of 50 full-time employees and training and benefits,” she said. “For every dollar we contribute in incentives, the city receives close to $5 in return on our investment.”

City Rep. Cassandra Hernandez Brown said she had no trouble voting to increase El Paso Electric’s franchise fee from 4 percent to 5 percent because she understood the issues and supported the move.

“We have been in discussions about the El Paso Electric franchise fee on the street rental charge,” she said. “Mostly it’s briefings from part of the rate case, so most of it was done in executive session.

“We have been updated to the best of my knowledge – I have been. The purpose is to support business development, and job creation as a tool for economic development-related projects.”

The utility had proposed a decrease in rates because of the money it expects to save in federal taxes following the reduction in the corporate tax rate approved by Congress.

Then the city came back with its proposal to increase the franchise fee.

“The tax rate reduction credit is still higher than the 1 percent approved by the city of El Paso,” said El Paso Electric spokesman George de la Torre. “A typical Texas residential customer using an average of 635 kilowatt hours of energy per month could see an average monthly bill decrease of $3.83, or 4.5 percent."

Source: http://www.elpasoinc.com/news/local_news/city-pushes-electric-franchise-up-to-m/article_72885ea2-3071-11e8-9a60-a79947714306.html