Council amends municipal code to credit state video franchise fees against street damage fee; IBA warns of lost trench-fund revenue

The City Council voted to amend the municipal code to permit state-franchised video service providers to receive a credit against the Street Damage Fee (SDF), a change staff and the city attorney said is intended to avoid potential litigation under state and federal law governing state franchises.

In the presentation, the Transportation Department said the annual credit is forecast at about $470,000 based on recent activity and the increase to the street damage fee that took effect Jan. 1. "These excavators have argued that the fee is duplicative," the presenter said, and the proposal creates a mechanism so that the general fund will make the trench cut fund whole in the same way similar credits are handled for SDG&E under negotiated franchise agreements.

Independent Budget Analyst Jordan Moore told the council the IBA supported requiring trench-restoration work but recommended three follow-ups: procure an updated engineering study on pavement and trench impacts; secure dedicated staffing and budget to enforce the Street Preservation Ordinance (SPO); and direct state and federal lobbying to pursue statutory clarifications that would explicitly allow cities to recover costs tied to trenching.

Ryan Garrity of the City Attorney's Office explained the legal context: state franchises for video service are governed by the Digital Infrastructure and Video Competition Act (DIVCA), and federal and state case law has been interpreted to mean the franchise fee is "the sum and total consideration" for use of the right of way. Garrity said the city is amending local code to reduce exposure to litigation while keeping higher restoration standards imposed by the SPO in place.

Council debate focused on trade-offs between legal risk and local cost recovery. Councilmember Von Wilpert said he was "not thrilled" but understood the limitation imposed by state law and emphasized the need to hold all trenching parties to the new restoration standards. Councilmember Lee and others pressed staff to return with updates on SPO implementation and enforcement capacity.

The council approved the amendment on a recorded vote. Staff said the restoration requirements in the SPO remain unchanged: excavators must meet higher immediate restoration standards, and the city's engineers retain authority to order additional repairs. The $470,000 estimate is provisional and will depend on future franchise activity and enforcement outcomes.

What this means: The credit reduces immediate annual revenue into the trench-cut fund and shifts the cost-recovery question to state and federal policy. Staff and the IBA urged pursuing legislative clarifications while strengthening enforcement and commissioning an updated engineering study to define appropriate restoration standards.

Actions and follow-up: Council asked staff to monitor franchise activity and to report back on SPO enforcement, engineering-study procurement, and budget requests to fund enforcement positions. The council also agreed to include statutory clarification for DIVCA in its legislative lobbying platform.

Vote: The amendment passed on a recorded vote (unanimous in attendance; roll-call recorded 7-0 with one member absent and one council district vacant).