City Finance Committee Addresses Potential Decline in Cable Franchise Fees

City of Marshfield Budget Could Take a Hit if Cable Franchise Fees Decline

OnFocus – At Tuesday’s meeting of the City of Marshfield Finance, Budget, and Personnel meeting, the Board discussed anticipated challenges to the City’s budget as Charter franchise fees continue to decline.

Members reviewed a request to recommend Council approval of Resolution No. 2021-36: In Support of Sufficient State Aid to Cover Video Service Providers (VSP) Fee Rate Reduction.

“There is now concern as to whether the State will provide the necessary funding for the Video Service Providers (VSP) fee payments in the next budget,” City Administrator Steve Barg stated.

Prior to the State-mandated reduction in VSP fees, the City assessed a franchise fee of 5% on Charter Communications that produced roughly $250,000 per year in revenue for the City.

Legislation passed by the State in 2019 reduced what cities could charge in VSP fees to a maximum of 4.5% in 2020, and 4% in 2021 and subsequent years.

“At that time, the State made a commitment to provide offset payments to effectively make communities whole, so that no loss of revenue would be experienced,” said Barg. “However, the current budget being considered by the State legislature does not increase funding for the offset payments from last year’s level, putting cities in jeopardy of receiving only half the state aid required to make municipalities whole.”

If the fee reduction is not offset, the City would lose approximately $25,000 in revenue, leaving be a “substantial hole” in the budget for 2022 and beyond, added Barg.

The City of Marshfield transitioned from contracting communications services to implementing a Communications Department in 2018.

At Tuesday’s meeting, Alderman Peter Hendler asked how this issue could potentially impact the City’s budget in future, if the State chooses not to offset the loss from declining franchise fees.

“It would be significant,” said Barg, explaining that the communications department is funded by the franchise fee. “That would cause us to look at possible reductions or funding from elsewhere…That does limit what we can do in that department.”

The FBP Committee recommend Council’s approval of Resolution No. 2021-36, and authorized the City Administrator to send a resolution to legislators to communicate concerns on this issue.

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