Durham City Councilman Steve Schewel says utilities passing fiber costs to taxpayer

City Council members say utility providers are forcing taxpayers to bear the cost of overseeing hundreds of miles of fiber installation.

“I just want to tell you I think it’s wrong. I am disappointed in the utilities,” City Councilman Steve Schewel said. “I think it is unfair to taxpayers.”

The issue came up Monday night as the City Council considered and ultimately renewed telecommunication licenses for AT&T and affiliated companies.

Before the vote, Schewel and others expressed frustration about the possibility the city might have to bear more of the cost of permitting, inspecting and other challenges associated with the installation of fiber optic cable across Durham.

For years, the city has been collecting license fees from utilities that let them work in the public right-of-way. The city also collected permit and inspection fees for individual projects, such as the installation of fiber.

In 2015, city officials adjusted the fee formula to recapture 50 percent of the administrative costs of overseeing the fiber installation, said Deputy City Manager Bo Ferguson. Previously the city recouped about 23 percent.

City officials were using those fees to pay contractor Kimley-Horn and Associates from $3 million to $4 million over four years to issue permits, inspect work and address complaints associated with the installation of more than 2,000 miles of fiber – half of it underground – across Durham.

Since June 2015, more than 650 miles have been installed and 1,100 miles have been permitted, according to a city report. About 20 to 60 fiber installation crews are active in Durham each day to provide the much faster service. Google Fiber says it will offer internet speeds about 100 times faster than a typical broadband connection.

The city has received 632 related complaints – 523 relating to AT&T and 109 relating to Google Fiber. Complaints relate to the restoration of the right-of-way, damaged utility lines and other issues.

The legislature adopted on July 22 a law that limits municipalities’ ability to charge fees for activities in the rights-of-way for certain utility providers, including telecommunications.

The law, which goes into effect July 1, states that municipalities can charge a fee if the cost of administering the right-of-way program exceeds the revenue the city gets from state sales and use tax, a tax that some utilities collect from their users.

“I know that you and the other utilities went to the legislature to lobby for this,” Schewel told AT&T officials Monday. “I just want to express my feeling, my strong feeling, that this should not be an expense that the taxpayer should bear.”

Robert Doreauk, AT&T regional director of external affairs, said the legislative change clarified the use of fees that utility companies already pay. The city receives $20 million annually from a fund that telecommunications, energy and gas companies pay into.

City officials dispute Doreauk’s characterization, pointing out that utility users pay a tax on services that go into the fund, not the utility companies.

The law authorizing the sales and use tax states that the money “is a general revenue source for state and local governments” said Donald O’Toole, a city attorney. “It wasn’t set up as reimbursement for local governments’ inspection programs.”

Ferguson said city officials are exploring various options to recoup the money or adjust the process.

“We are trying to figure out how we are going to continue to deal with the significant volume that we have,” Ferguson said.

This story was originally published March 21, 2017 at 12:54 PM with the headline "Durham City Councilman Steve Schewel says utilities passing fiber costs to taxpayer."