Hopkins frets funding for eco-goals will hurt lower-income residents

Hopkins wants to help residents insulate their houses, buy electric bikes and make other environmentally friendly choices, but is trying to figure out how to fund that work without burdening poorer residents.

City staff proposed an across-the-board increase to utility franchise fees, the monthly fees paid by ratepayers to electric and gas utility companies like Xcel Energy and CenterPoint Energy, to create a fund for sustainability projects and city parks. Right now, residents pay fees totaling $7 per month on their gas and electric bills, with businesses paying higher rates. The proposed hike would raise the monthly total for residents to $10, bringing in an additional $427,000 a year.

“This is a smart way to use funds to address a problem that is not getting better,” Hopkins Mayor Patrick Hanlon said during a City Council meeting last week, referring to climate change.

Council members supported a fund for sustainability projects, but worried a flat fee increase would hurt poorer residents.

“This is a textbook definition of a regressive tax,” Council Member Alan Beck said. “It is going to be felt more by our low-income population.”

Cities can use utility franchise fees for any public purpose. In Hopkins, the current fees generate just under $1 million per year, which the city puts toward its general, capital and parks funds.

The additional money raised would beef up the parks fund and pay for city sustainability work and staff. The biggest chunk of the new money, $202,000, would become a climate solutions grant fund. Hopkins residents could apply for help with household sustainability projects such as weatherization and electric vehicle charger installation, or help with an electric bicycle purchase.

But for renters without their own homes to improve, Beck said he worried the fee increase would do more harm than good. Hopkins has a higher proportion of renters than neighboring suburbs, he noted.

Hanlon said he agreed it would be good to find a less regressive way to fund the initiatives. But he said he also wants Hopkins to have the staff and infrastructure to provide sustainability grants to residents and for city-led efforts, because he wants the city to be able to take advantage of state and federal grants.

“They’re looking for cities that are ready to implement,” Hanlon said, and he wants to show Hopkins is ready. “We’ll be able to leverage a lot of grant dollars that are coming in.”

Now city staff are exploring other ways to raise about $430,000 by hiking utility franchise fees, but distributing increases to have less impact on poorer residents. Hanlon suggested assessing the fee by energy use, so large businesses would pay the most.

The council will hear a new proposal July 11.