The City of Norfolk can look forward to an annual revenue boost of at least $60,000 under a new way of taxing natural gas.
Ordinances adopted Monday by the city council extended the city's franchise agreement with Black Hills Energy another 25 years and established an occupation tax on natural gas companies.
The 3 percent franchise fee that had been paid by Black Hills to the city has now been changed to an occupation tax. That gives the city flexibility to change the tax rate without impacting the franchise ordinance, according to information from Randy Gates, city finance director.
Under the new ordinance, the tax is based on volume of gas transported instead of revenues a gas company receives.
Many customers currently buy gas from a company other than Black Hills and just use Black Hills for delivery to their businesses. Customers who buy gas from Black Hills pay a significantly higher franchise fee than the transport-only customers
The new tax rates are 3.25 cents per hundred cubic feet for residential and commercial customers and 1 cent per hundred cubic feet for industrial customers.
The rates were set to maintain roughly the same amount of revenue the city receives now from customers who buy gas from Black Hills. That means residential customers and most commercial customers will see little change in their taxes.
Transport-only customers, who now pay little in franchise fees compared to customers who buy gas from Black Hills, will see significant increases in taxes. As of December 2008, there were 243 transport-only customers, and they will experience an average monthly tax increase of $13.
There are also nine "interruptible transport-only' customers who are all large-volume users. The average monthly increase will be about $300 for them.
In all, the net increase in tax revenue as a result of the change is expected to be more than $60,000 annually paid by transport-only customers.
The ordinance also includes an annual adjustment to occupation tax rates based on changes in the consumer price index.
