Council advances 1% franchise-fee increase to sustain fare-free transit; public hearing held

The Iowa City Council held a public hearing June 16 on an ordinance to raise the city's franchise fee on electricity and natural gas from 1% to 2% and to expand the permitted uses of the revenue. The goal: to create a stable local revenue stream to help sustain the city's fare-free public-transit pilot, currently funded in part by one-time federal and other funds that will expire.

Staff presentation and pilot results: Kirk Lehman, assistant city manager, presented data showing the fare-free pilot increased ridership by roughly 43% in its first year and an expected 17% this year, producing about 700,000 additional rides and improved on-time performance. Staff said the pilot returned an estimated $3 million to riders pocketed as reduced travel costs and that the franchise-fee increase would generate about $1 million a year to help sustain the program.

Legal and administrative notes: Under state law cities may impose franchise fees (up to 5%); changing the fee requires a council public hearing, ordinance and a clear purpose statement for the revenue. Staff recommended expanding the city's revenue-purpose language to enumerate allowable transit-related uses and other items in state code.

Council action: Council gave first consideration to the ordinance and discussed implementation timing; staff noted the city must provide 90 days' notice to utilities and that the fee increase would be timed to take effect Nov. 15 under the schedule staff outlined.

Public comment: No members of the public spoke during the hearing. Council discussion focused on the stability of franchise-fee revenue (staff cautioned that fees are sensitive to energy-efficiency trends) and on complementary revenue opportunities such as advertising or voluntary donations to sustain transit.

Next steps: Council advanced the ordinance for final consideration and directed staff to incorporate the expanded purpose language permitting transit expenditures and to return for final passage on the schedule required by the ordinance and notice period.