A Polk County Judge’s order that the City of Des Moines refund a majority of the $12.6 million a year it has collected with a franchise fee since 2004 is “ironic,” Des Moines Mayor Frank Cownie said.

“It is ironic that just two weeks ago the state enacted legislation which memorializes Iowa cities’ right to collect up to 5 percent gas and electric franchise fees,” he said. “Franchise fees have been collected by some cities in Iowa for over 100 years.”

Des Moines has collected a utility franchise fee for more than 40 years, but for most of that period it bounced between 1 percent and 2 percent of customers’ utility bills. When the Iowa Legislature phased out its 5 percent statewide utility tax, Des Moines and a number of other Iowa cities raised theirs. In Des Moines, it went to 3 percent in 2004 and 5 percent in 2005.

Judge Joel Novak ruled that the city could only justify charging a 1 percent fee on gas and electric bills, and that the rest would have to be refunded. Just last week, Gov. Chet Culver signed into law a bill allowing cities to charge up to 5 percent. However, that legislation won’t affect the ruling.

“The cost imposed upon the city and its citizens by the existence of a franchise for gas and electric utilities has been significantly underestimated by the Court,” Cownie said. “We will follow the next legal steps to reach a final determination in this issue, which may include an appeal to the Iowa Supreme Court.”

If the ruling is allowed to stand, the city could see “an increase in the tax rate, a reduction in services, a reduction in capital improvements or a combination of all three,” Cownie said.

“The effect upon our taxpayers could be significant,” he said.