- About Us
Covington turns over franchise fee rock and finds cash
A consultant for Covington discovered recently that Comcast owed the city $38,000.
Rob Hendrickson, the city’s finance director, explained the staff decided to audit the cable company’s franchise fee payments as the contract was coming up for review.
“Sometimes you lose sight of that, the economy is cooking and money is coming in,” Hendrickson said. “But when the economy is squeezing you, we looked under every rock we could to find revenue.”
Covington hired a consultant, Muni Services based in California, to review the contracts. A franchise fee is what a company such as Comcast pays when it uses city right of way for its infrastructure such as fiber optic cable. Federal law allows the city to charge the franchise fee. Hendrickson said cities typically audit such franchise fee payments every five years, but, Covington hadn’t done so since it incorporated in 1997.
“It’s just a prudent practice,” Hendrickson said.
Muni Services looked over the franchise fee agreements, the payments, and other associated documentation and discovered the cable company owed the city $38,000 with $16,000 of that a continuing amount the city will continue to collect going forward, Hendrickson said.
Revenue generated by franchise fees goes to the city’s street fund. Hendrickson pointed out that Comcast isn’t paying more than it’s supposed to, the audit just allows the city to identify money it is owed and collect it.
Hendrickson said the city hired a consultant because there wasn’t anyone on staff with the expertise necessary to conduct the franchise fee audit nor was there staff time available. It didn’t cost the city up front because Muni Services took a portion of the revenue it discovered needed to be paid.
Given the success of the franchise fee audit of Comcast, Hendrickson said, the city will partner with Muni Services again to conduct a utility tax audit.
“That will probably translate into additional utility tax because Comcast pays both the franchise fee and the utility tax,” Hendrickson said. “We’re just getting started on that. We’re just in the beginning stages of (the utility tax audit) and putting the agreement together.”
He expects that audit to get started in the next month. Hendrickson said the city will likely look at other utility companies, too.
“We may down the road look at sales tax but that’s not on the radar right this minute,” Hendrickson said. “It’s just shifting revenue to where it should be in case it’s going somewhere different. It’s another rock to overturn and see what’s under it.”