Franchise Fees

Franchise fees are implemented as part of an agreement between local governments and utilities that use their rights of way. These agreements are executed to ensure that companies receiving special use of rights of way are paying fees intended to reimburse local governments for use of public rights of way and other public services, and also preventing general taxpayers from subsidizing such extra ordinary use.

Franchise agreements outline the terms under which utility companies use the rights-of-way and the terms of the compensation requirements. Franchise fees work much like a gross receipts tax and are typically  calculated on a percentage of the revenues derived from sales of the utility company to customers in that service area or territory.