City officials say raising franchise taxes could help keep Pleasant Grove's budget on an even keel.
This year the city had a $157,000 budget shortfall because of decreasing property-tax revenue. Luckily, city expenses also are down, Finance Director Kay Driggs told the City Council last week.But the city needs to make up the revenue lost from falling property values, and it's giving franchise taxes a hard look. The city could raise property taxes, which have not been increased in eight years, but doing so would not provide an immediate source of revenue, Mayor David Holdaway said.
At Holdaway's request, Driggs compared Pleasant Grove's franchise-tax structure to that of other cities. Driggs also looked at how much revenue the city could raise by increasing franchise taxes.
The results of that study indicate Pleasant Grove's franchise taxes are lower than those of many Utah County cities: American Fork and Lehi charge a 5 percent franchise tax, while Orem charges 5.36 percent. Provo, on the other hand, has a 3 percent franchise tax.
Pleasant Grove charges a 2 percent franchise tax on natural gas and a 3 percent tax on power and cable television. Also, unlike other cities, Pleasant Grove doesn't apply the tax to telephone service, Driggs said.
US WEST threatened to sue Pleasant Grove about 10 years ago when the city proposed taxing telephone service, Holdaway said.
"They have to collect the money, and it makes it look like a rate increase," he said. "I don't think we should be concerned about the legality now because other cities do it."
Pleasant Grove collected $164,120 in franchise-tax revenue in 1989-90.
If the city raised its franchise tax to 5 percent and added the tax on telephone service, it would collect $343,571 in revenue - an increase of $179,451.
"It comes very close to taking care of the shortfall in other areas that the auditors were so critical of," Driggs said.
Holdaway said the city would couple any franchise tax increase with a review of its operation to see if expenses could be cut back. However, Pleasant Grove now operates at the lowest per-capita cost of any city in Utah County, Holdaway said.
"We're providing the bare bones as far as service," he said.
Pleasant Grove (proposed) 5%
American Ford 5%
Current Pleasant Grove franchise tax:
Electricity cable TV 3%
Natural gas 2%