Cities charge municipal right of way fees—or franchise fees—to certain utilities for the use of the public right of way. Like taxes on businesses, these fees are passed on to customers.
Texas’ Local Government Code stipulates that these fees should be “consistent with the burdens on municipalities created by the incursion of certificated telecommunications providers into a public right-of-way.” They should also provide “fair and reasonable compensation for the use of a public right-of-way.”
These fees might make sense if they were only used for right-of-way maintenance. Instead, a large part of the more than half a billion dollars in right of way fees paid every year by Texan consumers is spent on projects unrelated to rights of way.
The El Paso City Council recently voted to increase the right of way fee it charges to El Paso Electric to $27 million annually. Much of that will be diverted to fund corporate welfare:
“Three-quarters of 1 percent of the franchise fee currently goes to the Impact Fund, providing more than $2.5 million a year to the Medical Center of the Americas Foundation, $300,000 to the Project Arriba training program and $250,000 to the Hub of Human Innovation.
The additional $4 million will allow the city to sweeten incentive packages to lure new business or industry to El Paso and help homegrown companies with ambitious projects, said Jessica Herrera, the city’s director of economic and international development.”
The Foundation reported that El Paso charged about $57 million in right of way fees (electric, telecom, gas, and other) in 2017 and nearly $481 million between 2008 and 2017. Statewide, Texas’ ten largest cities levied more than $543 million in right of way fees in 2017 and over $5.1 billion between 2008 and 2017.
Adding insult to injury, El Paso voted on the increase in fees right after the electricity utility announced a decrease in rates from the federal corporate tax rate cut.
The purpose of right of way fees is to ensure proper care of the public right of way—not to build a slush fund to pick winners and losers by handing out citizen’s money to a favored group of businesses.
A better way to attract businesses to Texas is to offer lower taxes and fees across the board. Not imposing excessive right of way fees on utilities’ customers would be a good start.