Local Taxes. FPL franchise fees - Part I - what are they? Background provided in a Miami Herald article from July 2017 as well as Palmetto Bay's budget

Palmetto Bay runs on much more than property tax. This blog looks at one such additional source of revenue, FPL's franchise fees - a subtle pass through tax consisting of 3-6% of your electric service charges that is collected through your electric bill. What is it and where does it go?

Florida Power & Light collects a “franchise fee” for cities and counties across the state, and the for-profit utility turns over the money to local governments as a pass-through tax. The money generally goes into the general coffers of local governments, paying for police, parks and other core services. While all of FPL’s other franchise agreements in Florida can be approved by city councils and county commissions, Miami-Dade’s charter contains a unique rule: Voters must approve the agreement by referendum.

The above is an excerpt from Miami Herald online, July 31, 2017: Only in Miami-Dade do voters have the power to lower FPL bills. But will they? by Douglas Hanks. A good read both describing the tax and the political issues surrounding it.

By agreement, Palmetto Bay receives its share of this franchise fee, its proportional share collected from Miami-Dade County.

Source - FPL site: https://www.fpl.com/rates/sample-bill.html

View the FPL created sample bill (posted right) - the sample municipal tax for that month is $30.24 on a total electric service bill of $484.64. That means this (fictional/sample) account payor would pay $362.88 to the municipality annually based upon electric usage if this sample bill was an average of the entire 12 month service activity.

And posted immediately below is FPL's explanation of these other charges (taxes) that it collects and forwards on to local governments (CLICK HERE to view the FPL explanation online):

Other taxes and fees: Vary by area, as established by local governing bodies. FPL collects these costs for distribution to the appropriate entities.
» Franchise charge*: FPL competes with municipalities and county governments for the right to serve electric customers. If a local government chooses, it can enter into a contract with FPL that enables the government to charge residents a contractual amount, the franchise fee, in exchange for its agreement to not form an electric utility for the term of the franchise.
» Utility/municipal tax*: A tax imposed by a municipality or county government on the sale of electricity

It is now time for Palmetto Bay to negotiate its own franchise fee agreement with Miami-Dade County.

There are two main issues -
First, will Palmetto Bay negotiate a 3 or a 6% tax collected by FPL on the electric service bills and turned over to Palmetto Bay.
Second, will there be a franchise fee at all? This franchise fee is estimated to result in $800,000.00 tax revenue to the village in this current 2018-2019 municipal budget.

see page 63 of the actual budget, page 65 of the online .PDF

Note discussion of "Other General Fund Revenues, (page 14-15 of the budget - pages 16-17 of the online version)

Other General Fund Revenues

Besides ad-valorem taxes, projected revenues for the remaining budget include $4,100,000 in utility taxes and franchise fees, $2,362,076 in inter-governmental revenues, $1,316,463 in licenses, charges and permits,  and $258,980 for other miscellaneous revenue services.

Franchise Fees: Franchise Fees are charged to service providers for an exclusive or non-exclusive right to operate within the municipal boundaries of the Village. The charge is levied on a percentage of gross receipts basis.

Electric Franchise Fees: The largest of the franchise fees is the electric franchise fee collected from Florida Power & Light. The Village is eligible to receive electric franchise fees under the County's franchise agreement, through a separately negotiated InterLocal Agreement (between Miami-Dade County and various municipalities including Palmetto Bay): CLICK HERE to view sample. The revenue is collected by FPL from the electric accounts, passed to the County and ultimately remitted to the Village once a year in September. The budget is based on the estimated amount collected for the prior year.

Page 68 of budget, 70 of online document

FUTURE POSTS ON TOPIC:

I will post Part II, possibly more, within the next few days covering issues that include:
Will Palmetto Bay negotiate its own franchise fee agreement with FPL,
Will Palmetto Bay even have an opportunity.
What happens if it fails to negotiate this agreement?
If successfully negotiated, will Palmetto Bay collect 6% of the electric bills, 3% or less?