Rocky Ford Considers Franchise Fees on Water, Sewer, and Garbage Utilities Amid Legal, TABOR Questions

Description: Rocky Ford City Council reviews proposed franchise fees on utilities, raising legal concerns and TABOR implications for water, sewer, and garbage services.

CITY OF ROCKY FORD MEMORANDUM

TO: MAYOR AND CITY COUNCIL

FROM: KATHRYN M. SELLARS, CITY ATTORNEY DANIEL P. HARVEY, CITY ATTORNEY

DATE: MARCH 9. 2026

RE: FRANCHISE FEES

There have been a number of discussions concerning whether the City should impose a franchise fee on the City Water, Sewer and Garbage Enterprise. This memorandum intends to consolidate and clarify the the advice previously provided to City Council during meetings on this issue

First, as you are aware, City Council passed its 2026 budget with the understanding that it would consider a franchise fee ordinance that would be imposed on the Water, Sewer and Garbage Enterprise. The City's approval of the 2026 budget did not (and could not) not) create the franchise fee. The City is now considering a franchise fee on the Rocky Ford Water, Sewer and Garbage Enterprise.

Franchise Fees

general, a franchise fee can be seen as a fee imposed under an agreement between a municipality and typically another entity (often, a utility company) to use municipal property, such as a right-of-way. See C.R.S. § 31-32-101 (authorizing franchises for street railway, electric light plant or system, gasworks, gas plant or system, geothermal system, solar system, or telegraph or telephone system). The franchise fee received by the municipality under this arrangement operates as compensation for use of municipal property (often, for use of a right-of-way). Franchises agreements are commonly between a public entity and a utility company. There are only limited instances where a governmental entity has imposed a franchise fee on another governmental entity (for instance, the City of Manitou Springs imposes a franchise fee on the Colorado Springs Utilities through a franchise agreement).

Council should be aware that the grant of authority for franchises and therefore, franchise fees, does not expressly permit the City to impose franchise fees through an ordinance against its own enterprises. While we understand this has been done in another municipality, that municipality is a home rule and may have concluded it has broader powers than what is expressly provided under state law. Because the City is statutory, it is bound by the express grants under state law.

TABOR

TABOR is a form of a tax and expenditure limitation and limits how the government can collect and spend revenue. Colo. Const. Art. X, $§ 20(7)(d), 2(e). If a government's revenue exceed exceeds a certain limit, the excess must be refunded to the taxpavers unless approval is sought and the excess mu nded to the taxpayers unless approval is sought a obtained to retain such funds through a vote. Barber v. Ritter, 196 P.3d 238, 247 (Colo. 2008).

In general, a "fee" will not violate TABOR, while a new "tax" will violate TABOR if not approved by the voters. In distinguishing between a fee and a tax, a court will look "to the primary or principal purpose for which the money was raised, not the manner in which it was ultimately spent." Id. at 250. Specifically, "[flees are collected primarily to cover the costs of a particular government service, whereas taxes are collected primarily to cover the costs of government operation generally." Id.; Bloom v. City of Fort Collins, 784 P.2d 304, 308 (Colo. 1989) ("Unlike a tax, a special fee is not designed to raise revenues to defray the general expenses of government, but rather is a charge imposed upon persons or property for the purpose of defraying the cost of a particular governmental service").

To determine how a legislature (or in this case, City Council) "intends" to use the money generated by a particular charge, a court will look to "the language of the enabling statute for its expression of the primary purpose for the original imposition of the charge." Barber, 196 P.3d at 249. If the enabling ng ordinance ordinance la language provides that the primary purpose for the charge is to finance a particular service utilized by those who must pay the charge, then the charge is a "fee" and not subject to a TABOR violation. If, however, the language states that the primary purpose of the charge is to raise revenues for the general governmental spending, then it is a tax. Id.

Taken together, a franchise fee is generally not seen as violating TABOR, because a municipality imposes a "fee" for the use of its property, rather than to simply raise revenue. In other words, the fee is effectively a business cost related to use of municipal property. See Bruce v. City of Colorado Springs, 131 131 P.3d 1187 (Colo. App. 2005) ("[f]ranchise fees are not taxes, but rather are the price paid to rent use of public rights-of-way").

Follow SECO News on Facebook.
Subscribe to the SECO News YouTube Channel.