SIOUX FALLS, S.D. (KELO) — If you live in Sioux Falls, the fees on your cable bill may increase in 2020 if the city council moves forward with a plan presented by city administration.
The city is looking to increase the franchise fee from 2.5 percent to 5 percent and add an additional 1 percent fee to pay for the CityLink channel. This would more than double the current fees.
The proposal would increase bills for both Midco and Vast Broadband subscribers in Sioux Falls. The franchise fee is basically rent paid by the cable companies to connect cable to homes and use the right of way to run cable lines. The cable companies pass this fee onto the customer.
“It’s called a franchise fee, but in effect, you’ll hear a lot of people call it a tax because it works just like a tax,” Midco lawyer Pat Mastel told the Sioux Falls city council on Tuesday during an informational meeting.
Right now, the 2.5 percent collected goes to three different areas:
- 2.0% to the City of Sioux Falls general fund (can be used for many different things like road repairs or other infrastructure improvements)
- 0.25% goes to the Sioux Falls School District
- 0.25% goes to CityLink, the public access channel from the City of Sioux Falls where city council meetings are broadcast.
If approved by the city council, the 6 percent in fees would go to the same three areas, but the amount funded would change:
- 4.5% to the City of Sioux Falls general and sales tax fund
- 0.5% goes to the Sioux Falls School District
- 1.0% goes to CityLink
Jason Reisdorfer, Sioux Falls Director of Innovation and Technology, proposed using the 4.5 percent to increase funding to metro 911 communications, running more fiber optic cables to street lights and improvements to CityLink.
The CityLink improvements Reisdorfer proposed would include building a new “state-of-the-art” studio and creating more programming.
The City Council would ultimately decide how the 4.5 percent is spent.
Sioux Falls is looking at this issue now because the contracts with Midco and Vast are expiring at the end of the year.
The maximum franchise fee allowed by the federal government is 5 percent. The law also allows a 1 percent “community grant,” which provides funding for PEG (public, educational and government) television.
Sioux Falls has the lowest franchise fee among similar size cities in the region, according to Midco.
City council members asked Michael Bradley, an attorney hired by the City of Sioux Falls to negotiate the contract, as to why they have stayed at the 2.5 percent franchise fee for so long.
“It was a policy decision that the city made many years ago to have a lower franchise fee. Probably at the time, it wasn’t all that unusual, at least in this area,” said Bradley.
The city council won’t vote on this for a few weeks, but it’s already becoming controversial. Councilor Theresa Stehly said she is concerned for the citizen’s wallets.
“At the end of the day, it’s going to be a hardship on the citizens. It’s coming back to them,” Stehly said during the meeting.
Over the past few years, the city has seen a decline in revenue from the franchise fees.
“We think a lot of that is in part due to some of the cord cutting that’s happening nationally,” Reisdorfer said.
Reisdorfer estimates if they made the increase, the city would see an increase in revenues of $12 million over 10 years.
Midco doesn’t take a position on the increase, but their lawyers did acknowledge it would hurt business.
“Anytime you adjust rates upward, people will look at their bill and look at what they’re receiving and re-evaluate,” Mastel said. “They may say I don’t want to have HBO anymore, I don’t want to have Showtime anymore. They may say I won’t have cable TV anymore.”
The city of Sioux Falls is considering raising cable TV franchise fees. Cities set franchise charges on cable TV services that cable providers like Midco pass through to customers on their cable bills. These fees go directly to city government. Elected city leaders then determine how that money is allocated. This proposed increase would affect both cable TV providers in Sioux Falls.