By Ashley Fletcher Frampton
aframpton@scbiznews.com
Published Dec. 9, 2009

City of Charleston businesses and residents would pay higher electric and gas bills under a budget measure that won initial approval from City Council during nearly four hours of budget debate Tuesday night.

The measure, part of Mayor Joe Riley’s budget for the city’s 2010 fiscal year, calls for raising the electric and gas franchise fee from 3% to 5%. The city’s fiscal year begins in January.

Local governments can charge utilities a franchise fee, or a percentage of gross sales revenue, for the right to do business within their borders. City officials said that fee increase is likely to be passed on to utility customers.

Steve Bedard, the city’s CFO, said the average residential customer will pay an extra $5.40 a month, according to S.C. Electric & Gas, which provides service for the majority of the city. Larger business and nonprofit users could pay significantly more.

Although SCE&G would pay the fee to the city in April, customers wouldn’t see the pass-through fee on their bills until January 2011, Riley said.

The fee increase, which passed in a close vote, is expected to generate $3.8 million for the city. Riley said that money helps make up for other revenue lost as a result of the recession.

Riley’s $146 million budget is down about $1 million from this year’s spending plan.

The city is saving about $3 million by requiring employees to take five unpaid holidays next year keeping many positions open under a “flexible” hiring freeze. But some costs — health care and fuel, for example — have gone up, Riley said.

Mount Pleasant already charges a 5% franchise fee, Riley said, and North Charleston charges 4%.

Bedard and Riley said one motivation for proposing the franchise fee increase instead of a property tax hike is that large entities, such as hospitals, universities and the S.C. State Ports Authority, are exempted from property taxes but would be subject to the franchise fee.

Some large industrial utility customers that have been given special tax breaks as incentives would not have to pay the higher franchise fee.

Several council members pushed to avoid the fee increase by cutting expenses.

“It is another way of taxing consumers,” said Councilman Gary White.

Councilman William Dudley Gregorie proposed several ideas for savings. He suggested that city employees pay their own way to park in downtown garages and that overtime be cut except for public safety and recreation employees.

“I think we need deeper cuts than just furloughs,” he said.

Gregorie backed down after Riley said that charging employees for parking would reduce their salaries by about $90 per month and Bedard said that public safety and recreation employees represent 85% of the overtime budget.

In the end, a majority of council members voted for the budget proposal. Though they are related, the vote for the budget was separate from the earlier vote for the franchise fee.

White said he hoped Riley and Bedard would come back with suggestions for cutting $3.8 million from the budget by Tuesday, when the 2010 budget is up for a final vote.

Reach Ashley Fletcher Frampton at 843-849-3129.