Townsend calls for elimination of franchise fees

Sen. Randolph Townsend, R-Reno, Friday called for elimination of what he described as "Nevada's hidden consumer tax" - the franchise fees collected by local governments.

Townsend told his Commerce and Labor Committee local governments collected more than $141 million last year in franchise fees charged power companies, cable companies, phone companies and other private utilities. He said those fees are passed through to consumers and listed separately on consumer bills. He said people receive no benefit from those fees they pay.

"Franchise fees allow local governments to generate huge amounts of money while circumventing limitations on local taxing powers," Townsend said.

Consultant Nicholas Miller said the franchise fees are an example of government using its assets in a businesslike way.

"If you have a valuable piece of real estate, you should charge a reasonable rent because if you don't, the asset will be overused," he said. He compared charging rent in the form of a franchise fee appropriate because otherwise those utilities are getting a government supplement.

"Why should someone who uses right-of-way not have to pay a right of way fee," he said.

But Townsend said that right-of-way belongs to the consumers who pay the tax.

"I submit to you renting of a public right-of-way by the people who own the right-of-way is the most bizarre thing this chairman has ever seen," said Townsend.

SB277, which Townsend said was requested by Nevada Power Co., would cut franchise fees from their current maximum of 5 percent to 3 percent next year, 1 percent the year after and then eliminate them altogether. But Townsend said he would add a provision allowing local governments to ask voters to reinstate the fees.

Marvin Leavitt, representing a consortium of Nevada local governments, said he disagrees.

"My own philosophy is that we ought to be able to have a certain level of revenue to provide services without this constant going back and forth to the voters to get their approval," he said. "The state does not regularly go to the voters to verify what you've done."

He said those fees make up an average of more than 10 percent of local budgets and that taking them away would cut deeply into services those entities provide to residents. Mary Walker, who represents Carson City, Douglas and Lyon counties among other local governments, said the percentage is even higher in some small counties.

"Just about 60 percent of our total revenue goes into public safety," Leavitt said.

And he reminded lawmakers they just passed legislation giving property tax relief that reduces local government revenues significantly.

The committee took no action on SB277.

Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.