Apr. 9—ROCHESTER — A majority of Rochester residents have voiced support for paying a proposed natural gas franchise fee, but city staff is suggesting putting a final decision on hold.
“While engagement indicates general support of the concept, support is conditional and dependent on several key factors that are not yet sufficiently defined,” states a report prepared by Kayla Betzold, the city’s sustainability coordinator.
Following four months of public engagement related to the proposed fee, Betzold’s report indicates 61% of participating residents and 37% of participating business representatives voiced some level of support for paying an added fee for natural gas.
The proposed fee, which could be a flat monthly rate or adjusted based on use, would be collected by Minnesota Energy Resources in exchange for its access to city right-of-way, similar to cable franchise fees the city already charges.
City staff has reported more than 200 other Minnesota cities have implemented a natural gas franchise fee.
The proposed fee has been considered in the past without being enacted, and Rochester City Council members initiated the latest discussion last year as a way to either offset property tax increases or support the Rochester City Council’s environmental stewardship goals.
On Wednesday, members of the city’s Sustainability and Resiliency Commission finalized a letter to the City Council, encouraging the use of a franchise fee to support long-term sustainability goals that will benefit city residents.
“A lot of ideas have been brought forth that we would like to do, and the community would like us to do,” commission member Edward Cohen said, noting the proposed programs have lacked a consistent source of funding.
Betzold’s report points to potential programs to help residents and businesses lower energy bills through targeted improvement, as well as other community-led initiatives, but it also points out that residents want to see programs better defined before fully backing a new fee.
“Participants want clear and specific program design, including concrete examples of how funds would be used and what outcomes would be achieved,” she wrote. “There is also a strong expectation that any investment delivers tangible, measurable benefits, particularly in the form of reduced energy costs and improved housing conditions.”
Since community discussions of a natural gas franchise fee have not included details on how the new city revenue would be used, Betzold reports city staff is recommending putting the potential fee on hold to better define how the city would use revenue from the fee.
“Staff proposes that the City Council allocate funding to support 1 or 2 pilot initiatives focused on areas that received strong community interest, such as home energy improvement incentives to reduce high energy bills, rental housing efficiency improvements and community-led energy initiatives,” she wrote.
The report states a pilot program could be developed this year, giving staff time to collect data on participation and costs before revisiting the proposed franchise fee at some point in 2027 to later.
“This approach positions the city to refine program design, establish clear performance metrics and better evaluate long-term funding options,” Betzold wrote. “Following implementation and evaluation of pilot programs, staff recommends the city revisit the concept of a natural gas franchise fee or other funding mechanisms with improved clarity, stronger data, and continued community input.”
She noted the results would also likely point to the type of fee and amount that would need to be collected, since survey participants indicated a range of willingness to pay to support such projects, with the majority landing in the $1 to $2 a month range.
The results of the survey and other community engagement, along with the staff recommendation, will be reviewed by the City Council during its study session at 3:30 p.m. Monday in council chambers of the city-county Government Center, 151 Fourth St. SE.
