Lori Cardella

Lori Cardella and four friends shot another video the same day as their Obama tribute, and in this one they mock a proposed franchise fee passed in December by the Iowa City City Council. Once again, their intent is to parody a song performed by school children last February praising the country’s first black president for Black History Month, something many conservatives decried as “socialist indoctrination.”

Cardella is a candidate in the Jan. 19 special election for the Johnson County Supervisor seat that was vacated with the death of Larry Meyers. In addition, she serves as a county chair for 2nd District congressional candidate Christopher Reed.

She is second from the right in the video.

(h/t Coralville Post and Herald)

“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.

Of the $12.6 million a year raised from the franchise fee, the city must refund $9 million, according to the ruling by Judge Joel Novak. The fee, which amounts to a 5 percent charge on gas and electric bills, should have been set at 1 percent, the judge said.

Legislation signed into law by Gov. Chet Culver last week allows cities in Iowa to charge the full 5 percent for franchise fees going forward, but that won’t affect the ruling, which the city has indicated it plans to appeal.

Supporters of the franchise fee say it helps ease the property-tax burden by spreading the cost of government services to nonprofits and other entities that don’t pay property taxes.

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.

The Iowa Supreme Court ruled in May 2006 that the city could collect only enough revenue to cover the actual cost of regulating the gas and electric utilities. The court then sent the case back to the district court to resolve whether the amount the city is collecting is justified, prompting Wednesday’s ruling.

The decision could be a big blow to Des Moines’ budget. Last week, City Manager Rick Clark said the city would face a $5 million budget shortfall in 2011, up from an estimated $3.5 million. The prospect of paying back tens of millions in fees collected over the course of five years could force the city to choose between deep cuts — including layoffs — or raising property taxes.

Des Moines City Manager Rick Clark told The Des Moines Register that the city would face a $5 million budget shortfall in 2011, up from an estimated $3.5 million. The city will reach out to its employees to seek salary and benefit cuts to help close the gap. But, if the legislature had not stepped in and officially legalized franchise fees, the city’s budget problems could have become catastrophic.

In 2004, Des Moines resident Lisa Kragnes sued the city saying the franchise fee was an illegal tax. The case, which received class certification for all Des Moines residents and businesses, is now in the hands of a District Court Judge. If the judge rules against Des Moines it could be forced to repay millions of dollars in refunds to customers.

The fee brings in about $12.6 million annually.

The new legislation ensures that even if Des Moines is forced to repay past fees it can still collect in the future, avoiding an even bigger hole being punched into its budget. In addition to Des Moines, 25 other cities in Iowa charge a franchise fee, which is designed to help cover the costs of operating, maintaining and regulating a utility. Supporters of the franchise fee say it helps ease the property-tax burden by spreading the cost of government services to nonprofits and other entities that don’t pay property taxes.

According to The Register, Des Moines cut its 2010 budget by $14 million with a mix of job cuts, privatization, salary freezes and expense reductions.

The franchise fee was included in the catch-all standings bill passed on the final day of the legislative session.